<PAGE>
AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON MAY 13, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONCENTRA MANAGED CARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-3363415
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>
------------------------------
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
(617) 367-2163
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
DONALD J. LARSON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CONCENTRA MANAGED CARE, INC.
312 WHARF
BOSTON, MA 02109
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPY TO:
RICHARD A. PARR II, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CONCENTRA MANAGED CARE, INC.
5080 SPECTRUM DR.
SUITE 400 WEST
DALLAS, TX 75248
JAMES WESTRA, ESQ.
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MA 02110
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
investment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE REGISTRATION
REGISTERED REGISTERED SHARE (1) OFFERING PRICE (1) FEE
<S> <C> <C> <C> <C>
4.5% Convertible Subordinated Note due 2003 $230,000,000 100% $230,000,000 $67,850
Common Stock, par value $.01 per share (2) (2) (2) None
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) Such indeterminate number of shares of Common Stock as shall be issuable
upon conversion of the Notes being registered hereunder. No additional
consideration will be received for the Common Stock and therefore no
registration fee is required pursuant to Rule 457(i).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THOSE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED MAY , 1998
PROSPECTUS
$230,000,000
[LOGO]
4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2003
-----------
This Prospectus relates to the offering by the selling securityholders (the
"Selling Securityholders") of up to an aggregate of $230,000,000 principal
amount of 4.50% Convertible Subordinated Notes due 2003 (the "Notes") of
Concentra Managed Care, Inc. (the "Company" or "Concentra"), and the 5,575,757
shares of common stock, par value $0.01 per share, of the Company (the "Common
Stock"), that are issuable upon the conversion of the Notes. The Notes will be
convertible at the option of the holder of such Notes (the "Holder") into shares
of Common Stock at any time on or after 90 days following the last date of the
initial issuance of the Notes through maturity, unless previously redeemed or
repurchased, at a conversion price of $41.25 per share, subject to certain
adjustments (the "Conversion Price"). See "Description of Notes--Conversion of
Notes." The Common Stock is traded on the Nasdaq National Market under the
symbol "CCMC." On May 5, 1998, the closing price of the Common Stock was $30 1/4
per share.
Interest on the Notes is payable on March 15 and September 15 of each year,
commencing on September 15, 1998. The Notes will mature on March 15, 2003 unless
previously redeemed or repurchased. The Notes are not redeemable by the Company
prior to March 15, 2001. Thereafter, the Notes will be redeemable on at least 30
days' notice at the option of the Company, in whole or in part, at the
redemption prices set forth in this Prospectus, in each case together with
accrued and unpaid interest. Subject to certain restrictions and conditions, in
the event of a Change of Control (as defined) each Holder of the Notes has the
right to require the Company to repurchase all or any portion of such Holder's
Notes at 100% of the principal amount thereof, plus accrued and unpaid interest.
See "Description of Notes--Optional Redemption by the Company" and "--Repurchase
of Notes at the Option of Holders Upon a Change of Control."
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined) of
the Company. The Indenture (as defined) does not restrict the incurrence of
Senior Indebtedness or other indebtedness of the Company and its subsidiaries.
The Notes are PARI PASSU with the Company's outstanding 6% Convertible
Subordinated Notes due 2001 in the principal amount of $97,750,000. See
"Description of 6% Convertible Notes due 2001." As of December 31, 1997, on a
pro forma basis after giving effect to the sale of the Notes and use of proceeds
therefrom, the Company would have had no Senior Indebtedness outstanding and
would have had approximately $100,000,000 available to be drawn upon under its
revolving credit facility. The Notes are also effectively subordinated to all
existing and future indebtedness and other liabilities of the Company's
subsidiaries. See "Description of Notes--Subordination of Notes."
The Notes may be sold from time to time pursuant to this Prospectus by the
Selling Securityholders. The Notes may be sold by the Selling Securityholders in
ordinary brokerage transactions, in transactions in which brokers solicit
purchases, in negotiated transactions, or in a combination of such methods of
sale, at market prices prevailing at the time of sale, at prices relating to
such prevailing market prices or at negotiated prices. See "Plan of
Distribution." The Company will receive no part of the proceeds of sales from
the offering by the Selling Securityholders. All expenses of registration
incurred in connection with this offering are being borne by the Company, but
all selling and other expenses incurred by the Selling Securityholders will be
borne by such Selling Securityholders. None of the securities offered pursuant
to this Prospectus have been registered prior to the filing of the Registration
Statement of which this Prospectus is a part.
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED
HEREBY.
-------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY OTHER
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT REVIEWED THIS
DOCUMENT OR PASSED UPON THE ACCURACY OR DETERMINED THE
ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ,
1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed with the Commission by the Company can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 500 West Madison Street, Room 1400, Chicago, Illinois
60606 and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, Washington, D.C. 20549, at prescribed rates, or
on the world wide web at http://www.sec.gov. Copies of other materials
concerning the Company can be inspected at the offices of the Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which were omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
the Exchange Act are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1997 filed March 31, 1998;
2. The Company's Proxy Statement with respect to its 1998 Annual Meeting of
Stockholders dated April 7, 1998.
3. The Company's Current Reports on Form 8-K filed on January 23, 1998,
February 2, 1998, February 18, 1998, March 2, 1998, March 11, 1998, March 30,
1998, April 22, 1998 (Form 8K/A) and April 30, 1998;
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the documents referred to above
which have been or may be incorporated in this Prospectus by reference, other
than exhibits to such documents which are not specifically incorporated by
reference into the information that this Prospectus incorporates. Requests for
such copies should be directed to the Company's principal executive offices at:
Concentra Managed Care, Inc. 312 Union Wharf, Boston, Massachusetts 02109,
Attn.: Chief Financial Officer, (617) 367-2163.
------------------------
All Selling Securityholders must deliver a prospectus to purchasers at or
prior to the time of any sale of the Notes or Common Stock issuable upon
conversion of the Notes.
<PAGE>
SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE.
THE COMPANY
Concentra Managed Care, Inc. (the "Company" or "Concentra") is the leading
provider and comprehensive outsource solution for cost-containment and fully
integrated care management for employers & payors in the occupational, auto &
group healthcare markets. The Company offers its comprehensive services to
employers, insurers and third-party administrators of all sizes. Concentra was
formed by the merger of OccuSystems, Inc. (OccuSystems) and CRA Managed Care,
Inc., on August 29, 1997.
The Company's continuum of services is comprised of three main categories:
(1) field case management, (2) specialized cost-containment services and (3)
health services. The Company's field case management organization consists of
1,350 field case managers in 130 offices in 49 states and the District of
Columbia, providing medical management and vocational rehabilitation services.
The Company's specialized cost-containment services, including first report of
injury services, utilization management, specialized preferred provider network
management, telephonic case management and medical bill review services, are
provided in 83 service locations in 49 states. Health services include primary
care services and preventive services including pre-employment testing and loss
prevention services, and are provided through 147 clinics located in 37 markets
in 20 states. Through the year ended December 31, 1997, revenues from field case
management, specialized cost-containment services and health services
represented approximately 30%, 24% and 46% of total revenues, respectively.
Workers' compensation is a state mandated, comprehensive, insurance program
that requires employers to fund medical expenses, lost wages and other costs
resulting from work-related injuries and illnesses. Since their introduction in
the early 1900's, these programs have been expanded to all 50 states and the
District of Columbia. In addition, federal statutes provide workers'
compensation benefits for federal employees. Each state is responsible for
implementing and regulating its own program. Consequently, workers' compensation
benefits and arrangements vary on a state-by-state basis and are often highly
complex. According to statistics published in the 1998 Workers' Compensation
Year Book, total workers' compensation costs to employers were estimated to be
approximately $92 billion in 1996. While the industry is fragmented with a large
number of competitors in the various subsegments of workers' compensation
services, Concentra believes that it is the only integrated provider of care
management and cost-containment on a nationwide basis.
The Company's objective is to expand and capitalize on its presence as a
national provider of fully-integrated care management and cost-containment
services. Concentra's strategy is to (i) leverage its national organization and
local market presence to expand its relationship with national payors who are
increasingly seeking national solutions to their workers' compensation, group
health and auto-injury needs; (ii) capitalize on its customer base by
cross-selling case management, cost-containment and health services to its
existing customers; (iii) continue to consolidate physician practices
specializing in occupational medicine; (iv) further develop and affiliate with
vertically integrated networks of providers, including specialists and
hospitals; (v) continue to streamline patient care, client communication and
claims resolution through the use of information technology; and (vi) expand its
product offerings and enhance opportunities for growth through additional
strategic acquisitions.
RECENT DEVELOPMENTS
On February 24, 1998, the Company acquired privately-held Preferred Payment
Systems, Inc. ("PPS"), based in Naperville, Illinois, in a transaction pursuant
to which shareholders of PPS received approximately 7,100,000 shares of the
Company's Common Stock, $15,050,000 in cash and the assumption by Concentra of
PPS options totalling approximately 580,000 shares. The aggregate consideration
paid to
2
<PAGE>
the shareholders of PPS was approximately $247,600,000, valued on the date of
the closing of the transaction. The Company repaid approximately $49,000,000 of
indebtedness of PPS with borrowings under the Company's revolving credit
facility. The transaction will be accounted for as a pooling of interests. PPS,
a leading nationwide provider of specialized cost-containment and outsourcing
services for healthcare payors, had approximately $34,900,000 in net revenues
and approximately $7,400,000 in pre-tax income for the year ended December 31,
1997.
The acquisition of PPS significantly expands Concentra's current market
presence in retrospective bill review services for the group health marketplace.
The Company believes that the combination of PPS and Prompt Associates, Inc.,
which was acquired by the Company in 1996, results in an entity that is the
leader in the medical claims review industry.
The Company's executive office is located at 312 Union Wharf, Boston,
Massachusetts 02109, and the Company's telephone number is (617) 367-2163.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.............. $230,000,000 aggregate principal amount of 4.50%
Convertible Subordinated Notes due 2003.
Interest Payment Dates.......... March 15 and September 15 of each year, commencing
September 15, 1998.
Maturity Date................... March 15, 2003.
Conversion Rights............... The Notes are convertible into shares of Common Stock at
any time on or after the 90th day following the latest
date of initial issuance of the Notes and prior to
maturity, unless previously redeemed or repurchased, at a
conversion price of $41.25 per share, subject to certain
adjustments. See "Description of Notes-- Conversion of
Notes."
Optional Redemption............. The Notes are not redeemable by the Company until March
15, 2001. Thereafter, the Notes will be redeemable, at any
time, on at least 30 days' notice at the option of the
Company, in whole or in part, at the redemption prices set
forth herein, plus accrued interest. See "Description of
Notes--Optional Redemption by the Company."
Change of Control............... In the event that a Change of Control occurs, each Holder
of Notes may require the Company to repurchase all or a
portion of such Holder's Notes at 100% of the principal
amount thereof, together with accrued interest to the
repurchase date. See "Risk Factors-- Limitation on
Repurchase of Notes Upon Change of Control" and
"Description of Notes--Repurchase of Notes at Option of
Holders Upon a Change of Control."
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Subordination................... The Notes are unsecured and subordinated in right of
payment in full to all existing and future Senior
Indebtedness. See "Description of Notes--Subordination of
Notes." As defined, Senior Indebtedness includes the
Company's long-term debt, capital lease obligations and
any outstanding balance under its revolving credit
facility. The Indenture does not restrict the incurrence
of Senior Indebtedness or other Indebtedness of the
Company and its subsidiaries. The Notes are pari passu
with the Company's outstanding 6% Convertible Subordinated
Notes due 2001 in the principal amount of $97,750,000. See
"Description of 6% Convertible Notes due 2001." At
December 31, 1997, on a pro forma basis after giving
effect to the sale of the Notes and use of proceeds
therefrom, the Company would have had no Senior
Indebtedness outstanding and would have had approximately
$100,000,000 available to be drawn upon under its
revolving credit facility.
Use of Proceeds................. The Company will not receive any of the proceeds from the
sale of the Notes or the underlying Common Stock. See "Use
of Proceeds."
Registration Rights and The Company will be permitted to suspend the use of the
Liquidated Damages............ prospectus that is a part of this registration statement
during certain periods and under certain circumstances.
The Company will be required to pay liquidated damages to
the Holders of the Notes or the underlying Common Stock,
as the case may be, under certain circumstances if the
Company is not in compliance with its registration
obligations. See "Description of Notes--Registration
Rights."
</TABLE>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Words such as "believe," "anticipate," "expect," "plan," "intend,"
"estimate," "project," "will," "could," "may" and words of similar import are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 which are used in this
Prospectus and the documents incorporated by reference herein. All statements
other than statements of historical facts included or incorporated by reference
in this Prospectus, including, without limitation, statements regarding the
Company's future financial results, financial position, business strategy,
budgets, projected costs and plans and objectives of management for future
operations, are forward-looking statements. Although the Company believes its
expectations reflected in such forward-looking statements are based on
reasonable assumptions, no assurance can be given that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the expectations reflected in the forward-looking
statements herein include, among others, product and service demand and
acceptance, the availability of appropriate acquisition and joint venture
candidates, economic conditions, the impact of competition and pricing, changes
in the availability, cost and terms of financing, the impact of present or
future occupational, healthcare and insurance legislation and related
legislation or rule-making, the continued availability and functionality of data
processing equipment and licensed software, the impact of possible litigation,
and changes in operating expenses. For a more detailed discussion of the factors
which could cause actual results to vary from those disclosed in forward-looking
statements, reference is made to the following factors and to the cautionary
language contained in the Company's periodic reports that are incorporated
herein by reference. All subsequent written or oral forward-looking statements
attributable
4
<PAGE>
to the Company, or persons acting on its behalf, are expressly qualified in
their entirety by the foregoing cautionary statements.
RATIO OF EARNINGS TO FIXED CHANGES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1993 1994 1995 1996
--------- --------- --------- ---------
Ratio of earnings to fixed charges (1)........................................ 2.0x 1.5x 2.9x 5.9x
Ratio of adjusted earnings to fixed charges (2)............................... 2.0x 1.5x 3.0x 6.1x
<CAPTION>
<S> <C>
1997
---------
Ratio of earnings to fixed charges (1)........................................ 1.9x
Ratio of adjusted earnings to fixed charges (2)............................... 4.6x
</TABLE>
- ------------------------
(1) Computed by dividing the sum of net earnings, before deducting provisions
for income taxes and fixed charges, by total fixed charges. Fixed charges
consist of interest on debt, including amortization of debt issuance costs,
and one-fourth of rent expense, estimated by management to be the interest
component of such rentals.
(2) Computed by dividing the sum of net earnings, before deducting nonrecurring
charges, provisions for income taxes and fixed charges, by total fixed
charges. Fixed charges consist of interest on debt, including amortization
of debt issuance costs, and one-fourth of rent expense, estimated by
management to be the interest component of such rentals.
5
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN
THE NOTES OFFERED HEREBY.
DEPENDENCE ON FUTURE ACQUISITIONS AND JOINT VENTURES; ACQUISITION RISKS
The Company's growth in new and existing markets is dependent upon an
aggressive acquisition and joint venture strategy. The Company is in various
stages of negotiations to acquire practices from a number of prospective selling
groups. There can be no assurance that further suitable acquisition candidates
can be found, that acquisitions can be financed or consummated on favorable
terms or that such acquisitions, if completed, will be successful. In addition,
there can be no assurance that the Company will be able to integrate
successfully the operations of any acquired business or institute Company-wide
systems and procedures to operate successfully the combined enterprises. The
success of the Company's acquisitions will be determined by numerous factors,
including the Company's ability to identify suitable acquisition candidates,
competition for such acquisitions, the purchase price, the financial performance
of the acquired businesses after acquisition and the ability of the Company to
integrate effectively the operations of acquired businesses. A strategy of
growth by acquisition also involves the risk of assuming unknown or contingent
liabilities of the acquired business, which could be material, individually or
in the aggregate. Any failure by the Company to identify suitable candidates for
acquisition, to integrate or operate acquired businesses effectively or to
insulate itself from unwanted liabilities of acquired businesses may have a
material adverse effect on the Company's business, financial condition and
results of operations. The Emerging Issues Task Force of the Financial
Accounting Standards Board is currently evaluating certain matters relating to
the physician practice management industry, including a review of accounting for
business combinations. The Company is unable to predict the impact, if any, that
this review may have on the Company's acquisition strategy.
The Company has also entered into, and is in various stages of negotiations
to form, joint ventures to own and operate occupational healthcare centers in
selected markets. The Company's strategy is to form these joint ventures with
competitively-positioned hospital management companies, hospital systems and
other healthcare providers. There can be no assurances that the Company will
continue to utilize joint ventures as part of its growth strategy, that further
suitable joint ventures can be formed or that such existing or future ventures
will be successful.
EFFECT OF AMORTIZATION ON RESULTS OF OPERATIONS
The Company has pursued acquisitions as an important component of its
business strategy, and expects that it will continue to pursue acquisitions. The
Company has had, and will continue to have, significant charges for depreciation
and amortization expense related to the fixed assets and intangibles acquired,
or to be acquired, in its acquisitions. Consequently, the Company expects that
such depreciation and amortization will continue to impact its results of
operations. The Company periodically reviews whether changes have occurred,
either specific to the business or generally in the industry, which might
require revision of the remaining estimated useful life of the assigned goodwill
or render all or a portion of the goodwill non-recoverable. In accordance with
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of," impairments are
determined by comparing undiscounted estimated future cash flows to the carrying
value of long-lived assets. At December 31, 1997, net intangible assets were
approximately $229,110,000 compared to total assets of $436,423,000 and
stockholders' equity of $223,923,000.
MANAGEMENT OF GROWTH
The Company has experienced rapid growth. The continued rapid growth of the
Company could place a significant strain on its management and other resources.
The Company anticipates that continued growth, if any, will require it to
continue to recruit, hire, train and retain a substantial number of new and
6
<PAGE>
highly skilled administrative, information technology, finance, sales and
marketing and support personnel. The Company's ability to compete effectively
and to manage future growth, if any, will depend on its ability to continue to
implement and improve operational, financial and management information systems
on a timely basis and to expand, train, motivate and manage its work force.
Should the Company continue to experience rapid growth, there can be no
assurance that the Company's personnel, systems, procedures and controls will be
adequate to support the Company's operations or that management will adequately
anticipate all demands that growth will place on the Company. If the Company's
management is unable to manage growth effectively, the quality of the Company's
products and its business, operating results and financial condition could be
materially and adversely affected.
COMPETITION
The market to provide healthcare services within the workers' compensation
system is highly fragmented and competitive. The Company's primary competitors
have typically been independent physicians, hospital emergency departments and
hospital-owned or hospital-affiliated medical facilities. The Company believes
that, due to the emergence of managed care, its competitors will increasingly
consist of specialized provider groups, insurance companies, health management
organizations ("HMOs") and other significant providers of managed care products.
The Company also faces competition from large insurers, HMOs, preferred
provider organizations ("PPOs"), third party administrators ("TPAs") and other
managed health care companies. The Company believes that, as managed care
techniques continue to gain acceptance in the workers' compensation marketplace,
the Company's competitors will increasingly consist of nationally focused
workers' compensation managed care service companies, insurance companies, HMOs
and other significant providers of managed care products. Legislative reforms in
some states permit employers to designate health plans such as HMOs and PPOs to
cover workers' compensation claimants. Because many health plans have the
ability to manage medical costs for workers' compensation claimants, such
legislation may intensify competition in the market served by the Company. Many
of the Company's current and potential competitors are significantly larger and
have greater financial and marketing resources than those of the Company, and
there can be no assurance that the Company will continue to maintain its
existing performance or be successful with any new products or in any new
geographic markets it may enter.
INCREASED LEVERAGE AND RISKS OF INDEBTEDNESS
In connection with the sale of the Notes, the Company incurred $230,000,000
in additional indebtedness, which, after giving effect to the use of proceeds of
the sale of the Notes to repay all amounts outstanding under the Company's
revolving credit facility, increased the ratio of its total debt to its total
capitalization from 39.7% at December 31, 1997 and 52.3% at December 31, 1997 on
a pro forma basis to give effect to the acquisition of PPS as if the acquisition
occurred on December 31, 1997 to 63.0% at December 31, 1997 on a pro forma as
adjusted basis to reflect the sale of the Notes offered hereby and the
application of the estimated net proceeds therefrom as if the sale occurred on
December 31, 1997. As a result of this increased leverage, the Company's
principal obligations have increased substantially. The degree to which the
Company is leveraged could adversely affect the Company's ability to obtain
additional financing for working capital, acquisitions or other purposes and
could make it more vulnerable to economic downturns and competitive pressures.
The Company's increased leverage could also adversely affect its liquidity, as a
substantial portion of available cash from operations may have to be applied to
meet debt service requirements and, in the event of a cash shortfall, the
Company could be forced to reduce other expenditures and forego potential
acquisitions to be able to meet such requirements.
The amount of debt and debt-related payments is expected to increase
substantially as the Company pursues its growth strategy. As a result, an
increasing portion of the Company's cash flow will be devoted to debt service
and related payments and the Company will be subject to risks normally
associated with
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increased financial leverage. There can be no assurance that the Company will
generate sufficient cash flows from operations to cover required interest,
principal and any operating lease payments.
In September 1997, the Company entered into a $100,000,000 credit agreement
(the "Credit Facility") which has a maturity of five years. The obligations
under the Credit Facility are secured by the capital stock of the Company's
present and future principal subsidiaries. The Credit Facility contains certain
customary financial covenants and other restrictions.
SUBORDINATION
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness, including the Company's borrowings under the Credit
Facility and are structurally subordinated to all liabilities (including trade
payables) of the Company's subsidiaries. Since the Company is a holding company
that conducts its operations principally through subsidiaries, substantially all
of the Company's liabilities other than long-term debt are liabilities of the
subsidiaries. The Company's subsidiaries have also guaranteed the Company's
obligations under the Credit Facility. The Indenture does not restrict the
incurrence of Senior Indebtedness or other indebtedness or liabilities by the
Company or its subsidiaries. By reason of such subordination, in the event of
the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding
up of the business of the Company, the assets of the Company will be available
to pay the amounts due on the Notes only after all Senior Indebtedness has been
paid in full and, therefore, there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. As of December 31,
1997, on a pro forma as adjusted basis after giving effect to the sale of the
Notes and use of proceeds therefrom, the Company would have had no Senior
Indebtedness outstanding and would have had approximately $100,000,000 available
to be drawn upon under the Credit Facility. The Notes are PARI PASSU with the
Company's outstanding 6% Convertible Subordinated Notes due 2001 in the
principal amount of $97,750,000. See "Description of Notes--Subordination of
Notes" and "Description of 6% Convertible Notes due 2001."
The Company's ability to meet its cash obligations in the future will be
dependent upon the ability of its subsidiaries to make cash distributions to the
Company. The ability of its subsidiaries to make distributions to the Company is
and will continue to be restricted by, among other limitations, applicable
provisions of state law and contractual provisions. The Indenture will not limit
the ability of the Company's subsidiaries to incur such restrictions in the
future. The right of the Company to participate in the assets of any subsidiary
(and thus the ability of Holders of the Notes to benefit indirectly from such
assets) is generally subject to the prior claims of creditors, including trade
creditors, of that subsidiary except to the extent that the Company is
recognized as a creditor of such subsidiary, in which case the Company's claims
would still be subject to any security interest of other creditors of such
subsidiary. The Notes, therefore, are structurally subordinated to creditors,
including trade creditors, of subsidiaries of the Company with respect to the
assets of the subsidiaries against which such creditors have a claim.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes may require
the Company to repurchase all or a portion of such Holder's Notes. If a Change
of Control were to occur, there can be no assurance that the Company would have
sufficient financial resources, or would be able to arrange financing, to pay
the repurchase price for all Notes tendered by Holders thereof. In addition, the
Company's repurchase of the Notes as a result of a Change of Control may be
prohibited or limited by, or create an event of default under, the terms of
agreements related to borrowings which the Company may enter into from time to
time, including the Credit Facility and other agreements relating to
indebtedness. Failure of the Company to purchase tendered Notes would constitute
an Event of Default under the Indenture. See "Description of Notes--Repurchase
of Notes at the Option of Holders Upon a Change of Control."
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ABSENCE OF EXISTING MARKET FOR NOTES
The Notes constitute a new issue of securities. The Company has listed the
notes on the Nasdaq Small-Cap Market.
Prior to the effectiveness of the Registration Statement, the Notes were
designated for trading in the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") market; however, the Notes sold hereunder will no
longer be eligible for trading through PORTAL, and no assurance can be given
that an active trading market for the Notes will develop on the Nasdaq Small-Cap
Market or otherwise or, if such market develops, as to the liquidity or
sustainability of such market. If an active trading market does not develop or
is not maintained, holders of the Notes may experience difficulty in reselling,
or an inability to sell, the Notes. The Company may discontinue the listing of
the Notes on the Nasdaq Small-Cap Market or otherwise at any time. If an active
public trading market develops for the Notes, future trading prices of the Notes
will depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
Depending on such factors, the Notes may trade at a discount from their
principal amount.
UNCERTAINTIES RELATED TO CHANGING HEALTHCARE ENVIRONMENT; CHANGES IN MARKET
DYNAMICS
The healthcare industry has experienced substantial changes in recent years.
Although managed care has yet to become a major factor in occupational
healthcare, the Company anticipates that managed care programs, including case
rate and capitation plans, may play an increasing role in the delivery of
occupational healthcare services, and that competition in the occupational
healthcare industry may shift from individual practitioners to specialized
provider groups such as those managed by the Company, insurance companies, HMOs
and other significant providers of managed care products. To facilitate the
Company's managed care strategy, the Company is developing risk-sharing products
for the workers' compensation industry that will be marketed to employers,
insurers and managed care organizations. No assurance can be given that the
Company will prosper in the changing healthcare environment or that the
Company's strategy to develop managed care programs will succeed in meeting
employers' and workers' occupational healthcare needs.
Legislative reforms in some states permit employers to designate health
plans such as HMOs and PPOs to cover workers' compensation claimants. Because
many health plans have the capacity to manage health care for workers'
compensation claimants, such legislation may intensify competition in the market
served by the Company. Within the past few years, several states have
experienced decreases in the number of workers' compensation claims and the
average cost per claim which have been reflected in workers' compensation
insurance premium rate reductions in those states. The Company believes that
declines in workers' compensation costs in these states are due principally to
intensified efforts by payors to manage and control claim costs, to improved
risk management by employers and to legislative reforms. If declines in workers'
compensation costs occur in many states and persist over the long-term, they may
have an adverse impact on the Company's business and results of operations.
UNCERTAINTIES REGARDING HEALTHCARE REFORM
There have been numerous initiatives at the federal and state levels for
comprehensive reforms affecting the payment for and availability of healthcare
services. The Company believes that such initiatives will continue during the
foreseeable future. Aspects of certain of these reforms as proposed in the past
could, if adopted, adversely affect the Company.
RISKS INHERENT IN PROVISION OF MEDICAL SERVICES; POSSIBLE LITIGATION AND LEGAL
LIABILITY
The professional associations with which the Company is affiliated (the
"Physician Groups") and certain employees of the Company are involved in the
delivery of healthcare services to the public and, therefore, are exposed to the
risk of professional liability claims. Claims of this nature, if successful,
could result in substantial damage awards to the claimants which may exceed the
limits of any applicable
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insurance coverage. The Company is indemnified under its management agreements
with the Physician Groups for claims against them, maintains liability insurance
for itself and negotiates liability insurance for the physicians in the
Physician Groups. Successful malpractice claims asserted against the Physician
Groups or the Company, however, could have a material adverse effect on the
Company's financial condition and profitability.
The Company, through its utilization management services, makes
recommendations concerning the appropriateness of providers' proposed medical
treatment plans of patients throughout the country, and as a result it could be
subject to changes arising from any adverse medical consequences. The Company
does not grant or deny claims for payment of benefits, and the Company does not
believe that it engages in the practice of medicine or the delivery of medical
services. There can be no assurance, however, that the Company will not be
subject to claims or litigation related to the grant or denial of claims for
payment of benefits or allegations that the Company engages in the practice of
medicine or the delivery of medical services. In addition, there can be no
assurance that the Company will not be subject to other litigation that may
adversely affect the Company's business or results of operations. The Company
maintains errors and omissions insurance and such other lines of coverage as the
Company believes are reasonable in light of the Company's experience to date.
There can be no assurance, however, that such insurance will be sufficient or
available at reasonable cost to protect the Company from liability which might
adversely affect the Company's business or results of operations.
CORPORATE PRACTICE OF MEDICINE AND OTHER LAWS AND REGULATIONS
Most states limit the practice of medicine to licensed individuals or
professional organizations comprised of licensed individuals. Many states also
limit the scope of business relationships between business entities such as the
Company and licensed professionals and professional corporations, particularly
with respect to fee-splitting between a physician and another person or entity
and non-physicians exercising control over physicians engaged in the practice of
medicine.
Laws and regulations relating to the practice of medicine, fee-splitting and
similar issues vary widely from state to state, are often vague, and are seldom
interpreted by courts or regulatory agencies in a manner that provides guidance
with respect to business operations such as those of the Company. Although the
Company attempts to structure all of its operations so that they comply with the
relevant state statutes and applicable medical practice, fee-splitting and
similar laws, there can be no assurance that (i) courts or governmental
officials with the power to interpret or enforce these laws and regulations will
not assert that the Company or certain transactions in which it is involved are
in violation of such laws and regulations and (ii) future interpretations of
such laws and regulations will not require structural and organizational
modifications of the Company's business.
Many states, including a number of those in which the Company transacts
business, have licensing and other regulatory requirements applicable to the
Company's business. Approximately half of the states have enacted laws that
require licensing of businesses which provide medical review services, such as
the Company. Some of these laws apply to medical review of care covered by
workers' compensation. These laws typically establish minimum standards for
qualifications of personnel, confidentiality, internal quality control, and
dispute resolution procedures. These regulatory programs may result in increased
costs of operation for the Company, which may have an adverse impact upon the
Company's ability to compete with other available alternatives for healthcare
cost control. In addition, new laws regulating the operation of managed care
provider networks have been adopted by a number of states. These laws may apply
to managed care provider networks having contracts with the Company or to
provider networks which the Company has organized and may organize in the
future. To the extent the Company is governed by these regulations, it may be
subject to additional licensing requirements, financial oversight and procedural
standards for beneficiaries and providers. Regulation in the healthcare and
workers' compensation fields is constantly evolving. The Company is unable to
predict what additional government regulations, if any, affecting its business
may be promulgated in the future. The Company's business may be adversely
affected
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by failure to comply with existing laws and regulations, failure to obtain
necessary licenses and government approvals or failure to adapt to new or
modified regulatory requirements. In addition, the automobile insurance
industry, like the workers' compensation industry, is regulated on a
state-by-state basis. Although regulatory approval is not required for the
Company to offer most of its services to the automobile insurance market, state
regulatory approval is required in order to offer automobile insurers' products
that permit them to direct claimants into a network of medical providers.
FRAUD AND ABUSE LAWS
A federal law (the "Anti-Kickback Statute") prohibits the offer, payment,
solicitation or receipt of any form of remuneration to induce or in return for
the referral of Medicare or other governmental health program patients or
patient care opportunities, or in return for the purchase, lease or order of
items or services that are covered by Medicare or other governmental health
programs. Violations of the statute can result in the imposition of substantial
civil and criminal penalties. In addition, as of January 1, 1995, certain
anti-referral provisions (the "Stark Amendments") prohibit a physician with a
"financial interest" in an entity from referring a patient to that entity for
the provision of any of eleven "designated health services" (some of which are
provided by Physician Groups affiliated with the Company).
At least six of the states in which the Company conducts business (Florida,
California, Texas, Arizona, New Jersey and Maryland) have enacted statutes
similar in scope and purpose to the Anti-Kickback Statute. There is currently no
authority interpreting these statutes in a manner directly relevant to the
Company's business. The Company believes that regulatory authorities and state
courts interpreting these statutes may regard federal law under the
Anti-Kickback Statute as persuasive, and further believes that its arrangements
with the Physician Groups comply with the Anti-Kickback Statute. In addition,
most states have statutes, regulations or professional codes that restrict a
physician from accepting various kinds of remuneration in exchange for making
referrals. Several states are considering legislation that would prohibit
referrals by a physician to an entity in which the physician has a specified
financial interest.
All of the foregoing laws are subject to modification and interpretation,
and have not often been interpreted by appropriate authorities in a manner
adverse to the Company's business, and are enforced by authorities vested with
broad discretion. The Company has attempted to structure all of its operations
so that they comply with all applicable anti-kickback and anti-referral
prohibitions. The Company also continually monitors developments in this area.
If these laws are interpreted in a manner contrary to the Company's
interpretation, are reinterpreted or amended, or if new legislation is enacted
with respect to healthcare fraud and abuse or similar issues, the Company will
seek to restructure any affected operations so as to maintain compliance with
applicable law. No assurance can be given that such restructuring will be
possible, or, if possible, will not adversely affect the Company's business or
results of operations.
RELIANCE ON DATA PROCESSING AND LICENSED SOFTWARE
Certain aspects of the Company's business are dependent upon its ability to
store, retrieve, process and manage data and to maintain and upgrade its data
processing capabilities. Interruption of data processing capabilities for any
extended length of time, loss of stored data, programming errors or other
computer problems could have a material adverse affect on the Company's business
and results of operations. Certain of the software used by the Company within
its medical bill review operation is licensed from an independent third party
software company pursuant to a non-exclusive license that may be terminated by
either party at any time. While the Company has historically maintained a good
relationship with the licensor, there can be no assurance that this software
license will not be terminated or that the licensor will be able to continue the
license on its existing terms. Although management believes that alternative
software would be available if the existing license were terminated, such
termination could be disruptive and could have a material adverse effect on the
Company's business and results of operations.
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INFORMATION SYSTEM UPGRADES AND YEAR 2000 COMPLIANCE
The Company continually evaluates and upgrades its management information
systems. The Company has completed a number of acquisitions in recent years, and
the information systems of some of the acquired operations have not been fully
integrated with the Company's information systems. Although the Company does not
anticipate any disruption in its operations or financial reporting as a result
of system upgrades or system integrations, there can be no assurance that such
disruption will not occur or that the desired benefits from the system upgrades
will be realized. Currently, there is significant uncertainty in the software
industry and among software users regarding the impact of the year 2000 on
installed software. Software database modifications and/or implementation
modifications will be required to enable such software to distinguish between
21st and 20th century dates. The Company uses third-party system software which
will need to be modified or replaced in order to address year 2000 compliance.
If the Company does not identify and implement modifications or new software
prior to January 1, 2000, its operations could be disrupted. In addition, the
Company's operations could be disrupted if the companies with which the Company
does business do not identify and correct any such year 2000 problems and such
failure adversely affects their ability to do business with the Company. While
the Company considers the cost to become year 2000 compliant to be a normal
operating cost necessary to periodically upgrade system software, there can be
no assurance that costs incurred in becoming year 2000 compliant will not have a
material adverse effect on the Company's business or operating results or
financial condition.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been volatile and may be
volatile in the future. Future developments concerning the Company or its
competitors, including developments related to governmental regulations,
acquisitions, operating results, the healthcare industry generally and general
market and economic conditions, may have a significant impact on the market
price of the Company's Common Stock.
DIVIDEND POLICY AND RESTRICTIONS
The Company does not intend to pay cash dividends on the Common Stock in the
foreseeable future and anticipates that future earnings will be retained to
finance future operations and expansion. The Credit Facility prohibits the
Company from paying dividends and making other distributions on its Common
Stock.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and certain
provisions of the Delaware General Corporation Law may make it difficult to
change control of the Company and replace incumbent management. For example, the
Company's Certificate of Incorporation provides for a staggered Board of
Directors and permits the Board of Directors, without stockholder approval, to
issue additional shares of Common Stock or establish one or more series of
Preferred Stock having such number of shares, designations, relative voting
rights, dividend rates, liquidation and other rights, preferences and
limitations as the Board of Directors may determine. The Company has also
adopted a Stockholder Rights Plan. See "Description of Capital Stock."
In addition, the terms of certain indebtedness of the Company (including the
Notes) may require prepayment upon a change of control of the Company and
therefore may have an anti-takeover effect. See "Description of
Notes--Repurchase of Notes at the Option of the Holders Upon a Change of
Control."
USE OF PROCEEDS
The Notes and the underlying shares of Common Stock are offered by the
Selling Securityholders and, accordingly, the Company will not receive any of
the proceeds from the sales thereof.
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DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of March 16, 1998 (the
"Indenture"), between the Company and Chase Bank of Texas, N.A., as Trustee (the
"Trustee"). A copy of each of the Indenture and the related registration rights
agreement dated March 11, 1998 between the Company and BT Alex. Brown
Incorporated, BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette
Securities Corporation and Piper Jaffrey Inc. (the "Initial Purchasers") (the
"Registration Rights Agreement") was filed as an exhibit to the Company's Form
8-K filed on March 30, 1998. The following summaries of certain provisions of
the Notes, the Indenture and the Registration Rights Agreement do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Notes, the Indenture and the Registration Rights
Agreement, including the definitions therein of certain terms which are not
otherwise defined in this Prospectus. Wherever particular provisions or defined
terms of the Indenture (or of the form of Note which is a part thereof) or the
Registration Rights Agreement are referred to, such provisions or defined terms
are incorporated herein by reference.
GENERAL
The Notes represent unsecured general obligations of the Company subordinate
in right of payment to certain other obligations of the Company as described
under "--Subordination of Notes," and convertible into Common Stock as described
under "--Conversion of Notes." The Notes are limited to $230,000,000 in
aggregate principal amount, and were issued only in denominations of $1,000 or
any multiple thereof and will mature on March 15, 2003, unless earlier redeemed
at the option of the Company or repurchased by the Company at the option of the
Holder upon a Change of Control.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the incurrence of Senior Indebtedness or the
issuance or repurchase of securities of the Company. The Indenture contains no
covenants or other provisions to afford protection to Holders of Notes in the
event of a highly leveraged transaction or a Change of Control of the Company
except to the extent described under "--Repurchase of Notes at the Option of
Holders Upon a Change of Control."
The Notes bear interest at the annual rate set forth on the cover page
hereof on the original date of issuance, payable on March 15 and September 15,
commencing on September 15, 1998, to Holders of record at the close of business
on March 1 and September 1, respectively. Notes called for redemption by the
Company shall include accrued and unpaid interest to, but excluding, the
Redemption Date; provided that if the Redemption Date is after a record date and
on or prior to the corresponding interest payment date, accrued interest shall
be payable to the Holder of the redeemed Notes registered on such record date.
Notes repurchased by the Company at the option of a Holder pursuant to a Change
of Control shall include accrued and unpaid interest to, but excluding, the
Repurchase Date; provided that if the Repurchase Date is after a record date and
on or prior to the corresponding Interest Payment Date and Damage Payment Date,
accrued interest shall be paid to the registered Holder on the close of business
on such record date and no additional interest will be paid to a Holder who
tenders a Note pursuant to the Repurchase Offer. If a Note is surrendered for
conversion between a record date and the next following Interest Payment Date
and the Note has not been called for redemption on a Redemption Date occurring
within such period (except for the interest payment date occurring on March 15,
2001), then the surrender of such Note shall be accompanied by a payment of the
amount of interest payable on such interest payment date on the principal amount
of the Note being surrendered for conversion.
Principal of, premium, if any, interest on, and liquidated damages, if any,
with respect to the Notes will be payable, and the Notes may be presented for
conversion, registration of transfer and exchange, without service charge, at
the office of the Company maintained for such purpose in New York, New York,
which is initially the office or agency of the Trustee. Principal, premium, if
any, interest and liquidated damages, if any, may, at the Company's option, be
paid at the Trustee's corporate trust office or by check mailed to
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such Holders at the addresses set forth upon the registry books of the Company.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
The Indenture and the Registration Rights Agreement are governed by and
construed under the laws of the Commonwealth of Massachusetts.
CONVERSION OF NOTES
Each Holder of Notes has the right at any time on or after the 90th day
following the latest date of initial issuance of the Notes and prior to the
close of business on the Stated Maturity of the Notes, unless previously
redeemed or repurchased, at the Holder's option, to convert any portion of the
principal amount thereof that is an integral multiple of $1,000 into shares of
Common Stock at any time at the Conversion Price set forth on the cover page of
this Prospectus (subject to adjustment as described below). The right to convert
a Note called for redemption or delivered for repurchase and not withdrawn will
terminate at the close of business on the Business Day, respectively,
immediately prior to the Redemption Date or Repurchase Date for such Note,
unless the Company subsequently fails to pay the applicable Redemption Price or
Repurchase Price, as the case may be.
In the case of any Note that has been converted after any Record Date, but
on or before the next Interest Payment Date, interest, the stated due date of
which is on such Interest Payment Date, shall be payable on such Interest
Payment Date notwithstanding such conversion, and such interest shall be paid to
the Holder of such Note who is a Holder on such Record Date. Any Note converted
after any Record Date but before the next Interest Payment Date must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Notes being surrendered for
conversion; provided no such payment shall be required with respect to interest
payable on March 15, 2001. No fractional shares will be issued upon conversion
but, in lieu thereof, an appropriate amount will be paid in cash by the Company
based on the market price of Common Stock (determined in accordance with the
Indenture) at the close of business on the day of conversion. As a result of the
foregoing provisions, Holders that surrender Notes for conversion on a date that
is not an Interest Payment Date will not receive any interest for the period
from the Interest Payment Date next preceding the date of conversion to the date
of conversion or for any later period.
The Conversion Price is subject to adjustment in certain events, including
(a) any payment of a dividend (or other distribution) payable in Common Stock on
any class of Capital Stock of the Company, (b) any issuance to all holders of
Common Stock of rights, options or warrants entitling them to subscribe for or
purchase Common Stock at less than the then current market price of Common Stock
(determined in accordance with the Indenture), provided, however, that if such
rights, options or warrants are only exercisable upon the occurrence of certain
triggering events, then the Conversion Price will not be adjusted until such
triggering events occur, (c) certain subdivisions, combinations or
reclassifications of Common Stock, (d) any distribution to all holders of Common
Stock of evidences of indebtedness, shares of Capital Stock other than Common
Stock, cash or other assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
excluding dividends and distributions paid exclusively in cash and in mergers
and consolidations to which the third succeeding section applies), (e) any
distribution consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the third succeeding paragraph applies) to all holders of
Common Stock in an aggregate amount that, combined together with (i) all other
such all-cash distributions made within the then preceding 12 months in respect
of which no adjustment has been made and (ii) any cash and the fair market value
of other consideration paid or payable in respect of any tender or exchange
offer by the Company or any of its subsidiaries for Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been made,
exceeds 15% of the Company's market capitalization (defined as being the product
of the then current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date of such distribution, and
(f) the completion of a tender or exchange offer made by the Company or any of
its
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subsidiaries for Common Stock that involves an aggregate consideration that,
together with (i) any cash and other consideration payable in a tender or
exchange offer by the Company or any of its subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender or
exchange offer in respect of which no adjustment has been made and (ii) the
aggregate amount of any such all-cash distributions referred to in (e) above to
all holders of Common Stock within the 12 months preceding the expiration of
such tender or exchange offer in respect of which no adjustments have been made,
exceeds 15% of the Company's market capitalization on the expiration of such
tender offer. No adjustment of the Conversion Price will be required to be made
until the cumulative adjustments amount to 1.0% or more of the Conversion Price
as last adjusted.
Under the terms of the Rights Agreement (as defined herein), upon conversion
of any Notes prior to the redemption or expiration of the Rights (as defined
herein), the Holders of such Notes will receive, subject to certain limited
conditions, an appropriate number of Rights with respect to the shares of Common
Stock issued upon such conversion. In addition, the Indenture provides that if
the Company amends the Rights Agreement or implements a replacement or successor
stockholders' rights plan, such rights plan must provide that upon conversion of
the Notes the Holder will receive, in addition to the Common Stock issuable upon
such conversion, such rights whether or not such rights have separated from the
Common Stock at the time of such conversion.
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the Conversion Price, the
Holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States federal income tax as a dividend; in
certain other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock.
The Company, from time to time and to the extent permitted by law, may
reduce the Conversion Price by any amount for any period of at least 20 Business
Days, in which case the Company shall give at least 15 days notice of such
reduction, if the Board of Directors has made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in the
Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for United States federal
income tax purposes. See "Certain Federal Income Tax Considerations."
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person with or into the Company (with certain
exceptions), or in case of any sale, transfer or conveyance of all or
substantially all of the assets of the Company, each Note then outstanding will,
without the consent of any Holder of Notes, become convertible only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or conveyance by a holder of the number of
shares of Common Stock into which such Note was convertible immediately prior
thereto, after giving effect to any adjustment event, who failed to exercise any
rights of election and received per share the kind and amount received per share
by a plurality of non-electing shares.
The Company will cause all registrations with, and will obtain any approvals
by, any governmental authority under any Federal or state law of the United
States that may be required in connection with the conversion of the Notes into
Common Stock. If at any time during the two-year period following the Closing
Date a registration statement under the Securities Act of 1933, as amended (the
"Securities Act") covering the shares of Common Stock issuable upon conversion
of the Notes is not effective or is otherwise unavailable for effecting resales
of such shares, shares of Common Stock issued upon conversion of the Notes
("Restricted Shares") may not be sold or otherwise transferred except in
accordance with or pursuant to an exemption from, or otherwise in a transaction
not subject to, the registration requirements of the Securities Act and, if a
registration statement under the Securities Act is not effective or is otherwise
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unavailable for effecting resales of such shares at the time of a conversion,
the Restricted Shares will bear a legend to that effect. The Transfer Agent for
the Common Stock will not be required to accept for registration or transfer any
Restricted Shares, except upon presentation of satisfactory evidence that these
restrictions on transfer have been complied with, all in accordance with such
reasonable regulations as the Company may from time to time agree with the
Transfer Agent. Under certain circumstances, the holders of the Restricted
Shares will be entitled to liquidated damages during such period. See
"--Registration Rights."
SUBORDINATION OF NOTES
The Notes are general, unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company.
The Notes are structurally subordinated in right of payment to all liabilities
(including trade payables) of the Company's subsidiaries. Since the Company is a
holding company that conducts business principally through subsidiaries,
substantially all of the Company's liabilities other than long-term debt are
liabilities of the subsidiaries. The Company's subsidiaries have also guaranteed
the Company's obligations under the Credit Facility. At December 31, 1997, on a
pro forma basis after giving effect to the sale of the Notes and the use of the
proceeds therefrom, the Company would have had no Senior Indebtedness
outstanding and would have had approximately $100,000,000 available to be drawn
upon under the Credit Facility. In addition, the Notes are PARI PASSU with the
Company's 6% Convertible Subordinated Notes due 2001 in the principal amount of
$97,750,000. The Indenture does not restrict the incurrence of Senior
Indebtedness or other indebtedness or liabilities by the Company or its
subsidiaries or the ability of the Company to transfer assets or business
operations to its subsidiaries, subject to the provisions described under
"--Repurchase of Notes at the Option of Holders Upon a Change of Control" and
"--Limitation on Merger, Sale or Consolidation" below.
The Indenture provides that no payment may be made by the Company on account
of the principal of, premium, if any, interest on, or liquidated damages with
respect to, the Notes, or to acquire any of the Notes (including repurchases of
Notes at the option of the Holder) for cash or property (other than Junior
Securities), or on account of the redemption provisions of the Notes, (i) upon
the maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, and interest on such Senior Indebtedness are first paid in full
(or such payment is duly provided for), or (ii) in the event of default in the
payment of any principal of, premium, if any, or interest on any Senior
Indebtedness of the Company when it becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a "Payment
Default"), unless and until such Payment Default has been cured or waived or
otherwise has ceased to exist. The payment of cash, property or securities
(other than Junior Securities) upon conversion of a Note will constitute payment
on a Note and therefore will be subject to the subordination provisions in the
Indenture.
Upon (i) the happening of an event of default (other than a Payment Default)
that permits, or would permit with (a) the passage of time, (b) the giving of
notice, (c) the making of any payment of the Notes then required to be made or
(d) any combination thereof (collectively, a "Non-Payment Default"), the holders
of Senior Indebtedness having a principal amount then outstanding in excess of
$3,000,000 (or with respect to which Senior Indebtedness the holders are
obligated to lend in excess of $3,000,000 principal amount) or their
representative immediately to accelerate its maturity and (ii) written notice of
such Non-Payment Default given to the Company and the Trustee by the holders of
an aggregate of at least $3,000,000 outstanding principal amount (or commitments
to lend up to $3,000,000 in Senior Indebtedness) of such Senior Indebtedness or
their representative (a "Payment Notice"), then, unless and until such
Non-Payment Default has been cured or waived or otherwise has ceased to exist,
no payment (by setoff or otherwise) may be made by or on behalf of the Company
on account of the principal of, premium, if any, interest on, or liquidated
damages with respect to, the Notes, or to acquire or repurchase any of the Notes
for cash or property, or on account of the redemption provisions of the Notes,
in any such case other than payments made with Junior Securities.
Notwithstanding the foregoing, unless (i) the Senior Indebtedness
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<PAGE>
in respect of which such Non-Payment Default exists has been declared due and
payable in its entirety within 179 days after the Payment Notice is delivered as
set forth above (the "Payment Blockage Period"), and (ii) such declaration has
not been rescinded or waived, at the end of the Payment Blockage Period, the
Company shall be required to pay all sums not paid to the Holders of the Notes
during the Payment Blockage Period due to the foregoing prohibitions and to
resume all other payments as and when due on the Notes. Not more than one
Payment Notice may be given in any consecutive 365-day period, irrespective of
the number of defaults with respect to Senior Indebtedness during such period.
However, if any Payment Notice within such 365-day period is given by or on
behalf of any holders of Senior Indebtedness other than under the Credit
Facility, the agent under the Credit Facility may give another Payment Notice
within such period. In no event, however, may the total number of days during
which any Payment Blockage Period or Payment Blockage Periods are in effect
exceed 179 days in the aggregate during any consecutive 365-day period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Senior Indebtedness of
the Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or represented
by each, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid, to the extent necessary to pay or to provide for the
payment of all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution, or provision therefor, to the holders of
such Senior Indebtedness.
Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshaling of
assets or liabilities (i) the holders of all Senior Indebtedness of the Company
will first be entitled to receive payment in full (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, interest on, and liquidated damages with
respect to, the Notes (other than Junior Securities) and (ii) any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than Junior Securities) to which the Holders or
the Trustee on behalf of the Holders would be entitled (by setoff or otherwise),
except for the subordination provisions contained in the Indenture, will be paid
by the liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness of the Company or
their representative to the extent necessary to make payment in full of all such
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such Senior
Indebtedness.
No provision contained in the Indenture or the Notes affects the obligation
of the Company, which is absolute and unconditional, to pay, when due, principal
of, premium, if any, interest on, and liquidated damages with respect, to the
Notes. The subordination provisions of the Indenture and the Notes do not
prevent the occurrence of any Default or Event of Default under the Indenture or
limit the rights of the Trustee or any Holder, subject to the preceding
paragraphs, to pursue any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up
of the business of the Company, the assets of the Company will be available to
pay the amounts due on the Notes only after all Senior Indebtedness has been
paid in full and, therefore, there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes outstanding.
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<PAGE>
The Company's ability to meet its cash obligations in the future will be
dependent upon the ability of its subsidiaries to make cash distributions to the
Company. The ability of its subsidiaries to make distributions to the Company is
and will continue to be restricted by, among other limitations, applicable
provisions of state law and contractual provisions. The Indenture does not limit
the ability of the Company's subsidiaries to incur such restrictions in the
future. The right of the Company to participate in the assets of any subsidiary
(and thus the ability of Holders of the Notes to benefit indirectly from such
assets) is generally subject to the prior claims of creditors, including trade
creditors, of that subsidiary except to the extent that the Company is
recognized as a creditor of such subsidiary, in which case the Company's claims
would still be subject to any security interest of other creditors of such
subsidiary. The Notes, therefore, are structurally subordinated to creditors,
including trade creditors, of subsidiaries of the Company with respect to the
assets of the subsidiaries against which such creditors have a claim.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not subject to redemption prior to March 15, 2001 and will be
redeemable thereafter at the option of the Company, in whole or in part, upon
not less than 30 days' notice to each Holder, at the following redemption prices
(expressed as percentages of the principal amount) if redeemed during the
12-month period commencing March 15 of the years indicated below, in each case
(subject to the right of Holders of record on a Record Date to receive interest
due on an Interest Payment Date that is on or prior to such Redemption Date)
together with accrued and unpaid interest and liquidated damages, if any, to,
but excluding, the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- -----------
<S> <C>
2001.......................................................... 101.8%
2002.......................................................... 100.9
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems fair and appropriate and in such manner as complies with any
applicable depositary, legal and stock exchange or automatic quotation system
requirement. The Notes may be redeemed in part in multiples of $1,000 only.
The Notes do not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
prior to the date fixed for redemption, to the Holder of each Note to be
redeemed to such Holder's last address as then shown upon the registry books of
the Registrar. The notice of redemption must state the Redemption Date, the
Redemption Price and the amount of accrued interest and liquidated damages, if
any, to be paid. Any notice that relates to a Note to be redeemed in part only
must state the portion of the principal amount equal to the unredeemed portion
thereof and must state that on and after the Redemption Date, upon surrender of
such Note, a new Note or Notes in principal amount equal to the unredeemed
portion thereof will be issued. On and after the Redemption Date, interest will
cease to accrue on the Notes or portions thereof called for redemption, unless
the Company defaults in its obligations with respect thereto.
REPURCHASE OF NOTES AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes has the right, at such Holder's option, to
require the Company to offer (the "Repurchase Offer") to repurchase all or any
part of such Holder's Notes (provided that the principal amount of such Notes
must be $1,000 or an integral multiple thereof) on the date (the "Repurchase
Date") that is no later than 30 Business Days after the occurrence of such
Change of Control at a cash price (the "Repurchase Price") equal to 100% of the
principal amount thereof, together with accrued and unpaid interest and
liquidated damages, if any, to (but excluding) the Repurchase Date. The
Repurchase Offer shall be made within 25 Business Days following a Change of
Control and shall remain open for 20 Business Days following its
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<PAGE>
commencement except to the extent that a longer period is required by applicable
law (the "Repurchase Offer Period"). Upon expiration of the Repurchase Offer
Period, the Company shall purchase all Notes tendered in response to the
Repurchase Offer. If required by applicable law, the Repurchase Date and the
Repurchase Offer Period may be extended as so required; however, if so extended,
it shall nevertheless constitute an Event of Default if the Repurchase Date does
not occur within 60 Business Days of the Change of Control.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest and liquidated damages, if any) of
all Notes so tendered and (iii) deliver to the Trustee the Notes so accepted,
together with an Officers' Certificate listing the Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to the
Holders of Notes so accepted payment in an amount equal to the Repurchase Price
(together with accrued and unpaid interest and liquidated damages, if any), and
the Trustee will promptly authenticate and mail or deliver to such Holders a new
Note or Notes equal in principal amount to any unpurchased portion of the Notes
surrendered. Any Notes not so accepted will be promptly mailed or delivered by
the Company to the Holder thereof. The Company will publicly announce the
results of the Repurchase Offer on or as soon as practicable after the
Repurchase Date.
The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change of Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Initial Purchasers.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect Holders, if such transaction does not constitute a Change of
Control. Moreover, certain events with respect to the Company which may involve
an actual change of control of the Company may not constitute a Change of
Control for purposes of the Indenture.
Upon the occurrence of a Change of Control, each Holder of Notes may require
the Company to repurchase all or a portion of such Holder's Notes. If a Change
of Control were to occur, there can be no assurance that the Company would have
sufficient financial resources, or would be able to arrange financing, to pay
the repurchase price for all Notes tendered by Holders thereof. In addition, the
Company's repurchase of the Notes as a result of a Change of Control may be
prohibited or limited by, or create an event of default under, the terms of
agreements related to borrowings which the Company may enter into from time to
time, including the Credit Facility and other agreements relating to
indebtedness. Failure of the Company to purchase tendered Notes would constitute
an Event of Default under the Indenture. See "--Repurchase of Notes at the
Option of Holders Upon a Change of Control."
Except as described herein, no modification of the Indenture regarding the
provisions on repurchase at the option of any Holder of a Note upon a Change of
Control is permissible without the consent of the Holder of the Note so
affected.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (other than to its wholly-owned
subsidiaries), whether in a single transaction or a series of related
transactions, to
19
<PAGE>
another Person or group of affiliated Persons, unless (i) either (a) in the case
of a merger or consolidation the Company is the surviving entity or (b) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Notes and the Indenture; (ii) no Default or Event
of Default shall exist or shall occur immediately after giving effect to such
transaction; and (iii) the Company has delivered to the Trustee an officer's
certificate and an opinion of counsel, each stating that such consolidation,
merger or transfer and, if a supplemental indenture is required, such
supplemental indenture comply with the Indenture and that all conditions
precedent relating to such transaction have been satisfied.
Upon any consolidation or merger or any sale, lease, conveyance or transfer
of all or substantially all of the assets of the Company in accordance with the
foregoing, the successor corporation formed by such consolidation or into which
the Company is merged or to which such sale, lease, conveyance or transfer is
made, shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture with the same effect as if such
successor corporation had been named therein as the Company, and when a
successor corporation duly assumes all of the obligations of the Company
pursuant to the Indenture and the Notes, the Company will be released from its
obligations under the Indenture and the Notes, except as to any obligations that
arise from or as a result of such transaction.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company shall deliver to the Trustee and to each Holder and
to prospective purchasers of the Notes identified to the Company by the Initial
Purchasers, within 15 days after it is or would have been required to file such
with the Commission, annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
Commission and, in each case, together with a management's discussion and
analysis of financial condition and results of operations as such would be so
required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on, or liquidated damages with respect to,
the Notes as and when due and payable and the continuance of any such failure
for 30 days, (ii) the failure by the Company to pay all or any part of the
principal of, or premium, if any, on the Notes when and as the same become due
and payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, pursuant to any Repurchase Offer or otherwise, (iii) the
failure of the Company to perform any conversion of Notes required under the
Indenture and the continuance of any such failure for 30 days, (iv) the failure
by the Company to observe or perform any other covenant or agreement contained
in the Notes or the Indenture and subject to certain exceptions, the continuance
of such failure for a period of 60 days after written notice is given to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Notes outstanding, (v) certain
events of bankruptcy, insolvency or reorganization in respect of the Company or
any of its Significant Subsidiaries (as defined), (vi) failure of the Company or
any Significant Subsidiary to pay principal, premium or interest when due at
maturity, including any applicable grace period, in respect of Indebtedness
(other than nonrecourse obligations) in an amount in excess of $10,000,000 and
continuance of such failure for 30 days after written notice is given to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of Notes outstanding, (vii) default by
the Company or any Significant Subsidiary with respect to any Indebtedness
(other than non-recourse obligations), which default results in
20
<PAGE>
the acceleration of Indebtedness in an amount in excess of $10,000,000 without
such Indebtedness having been discharged or such acceleration having been
rescinded or annulled for 30 days after written notice is given to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least 25%
in aggregate principal amount of Notes outstanding and (vii) final unsatisfied
judgments not covered by insurance aggregating in excess of $10,000,000, at any
one time rendered against the Company or any of its Significant Subsidiaries and
not stayed, bonded or discharged within 60 days. The Indenture provides that if
a default occurs and is continuing and if it is known to the Trustee, the
Trustee must, within 90 days after the occurrence of such default, give to the
Holders notice of such default, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the best interest of the Holders, except in the case of a
default in the payment of the principal of, premium, if any, or interest on or
liquidated damages with respect to, any of the Notes when due or in the payment
of any redemption or repurchase obligation.
The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (v) above with respect to
the Company), then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the Holders of
25% in aggregate principal amount of the Notes then outstanding, by notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal and accrued interest and
liquidated damages, if any, thereon to be due and payable immediately. If an
Event of Default specified in clause (v) above with respect to the Company
occurs, all principal and accrued interest and liquidated damages, if any, will
be immediately due and payable on all outstanding Notes without any declaration
or other act on the part of the Trustee or the Holders. The Holders of no less
than a majority in aggregate principal amount of Notes generally are authorized
to rescind such acceleration if all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and interest on, and
liquidated damages with respect to, the Notes that have become due solely by
such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in principal amount of the Notes at the time outstanding
may waive on behalf of all the Holders any default, except a default in the
payment of principal of or interest on, or liquidated damages with respect to,
any Note not yet cured, or a default with respect to any covenant or provision
that cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Subject to the provisions of the Indenture relating
to the duties of the Trustee, the Trustee is under no obligation to exercise any
of its rights or powers under the Indenture at the request, order or direction
of any of the Holders, unless such Holders have furnished to the Trustee
reasonable security or indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
Notes at the time outstanding have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee.
The Indenture provides that no Holder may pursue any remedy under the
Indenture, except for a default in the payment of principal, premium, if any, or
interest or liquidated damages, if any, on the Notes, unless the Holder gives to
the Trustee written notice of a continuing Event of Default, the Holders of at
least 25% in principal amount of the outstanding Notes make a written request to
the Trustee to pursue the remedy, such Holders furnish to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense, the Trustee
does not comply with the request within 60 days after receipt of the request and
the furnishing of indemnity, and the Trustee shall not have received a contrary
direction from the Holders of a majority in principal amount of the outstanding
Notes.
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<PAGE>
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Holders; provided, that
no such modification may, without the consent of each Holder affected thereby:
(i) change the Stated Maturity of any Note or reduce the principal amount
thereof or the rate (or extend the time for payment) of interest thereon or any
premium payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the conversion of
any Note or the enforcement of any such payment on or after the due date thereof
(including, in the case of redemption, on or after the Redemption Date), or
reduce the Repurchase Price, or alter the Repurchase Offer (other than as set
forth herein) or redemption provisions in a manner adverse to the Holders, (ii)
reduce the percentage in principal amount of the outstanding Notes, the consent
of whose Holders is required for any such amendment, supplemental indenture or
waiver provided for in the Indenture, (iii) adversely affect the right of such
Holder to convert Notes, or (iv) provide that other provisions of the Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Note affected thereby. A supplemental indenture entered into in
compliance with the "Limitation on Merger, Sale or Consolidation" covenant does
not require the consent of the Holders.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture provides that no direct or indirect partner, stockholder,
employee, officer or director, as such, past, present or future of the Company
or any successor corporation shall have any personal liability in respect of the
obligations of the Company under the Indenture or the Notes by reason of his,
her or its status as such partner, stockholder, employee, officer or director.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the
Indenture. The Company or Trustee may require a Holder, among other things, to
furnish appropriate endorsements, legal opinions and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
Company is not required to transfer or exchange any Notes selected for
redemption. Also, the Company is not required to transfer or exchange any Notes
for a period of 15 days before (i) the mailing of a notice of an offer to
repurchase as a result of a Change of Control or (ii) a selection of Notes to be
redeemed.
The registered Holder of a Note may be treated as the owner of it for all
purposes.
BOOK ENTRY, DELIVERY AND FORM
The Notes were issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and multiples thereof.
GLOBAL NOTE, BOOK-ENTRY FORM. The Notes are evidenced by one global Note
(the "Global Note") which has been deposited with, or on behalf of, The
Depository Trust Company, New York, New York ("DTC") and registered in the name
of Cede & Co. ("Cede") as DTC's nominee. Except as set forth below, record
ownership of the Global Note may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee.
Qualified institutional buyers (as defined in Rule 144A under the Securities
Act of 1933, as amended) ("QIBs") may hold interests in the Global Note directly
through DTC, if such QIB is a participant in DTC, or indirectly through
organizations which are participants in DTC (the "Participants"). Transfers
between Participants will be effected in the ordinary way in accordance with DTC
rules and will be settled in same-
22
<PAGE>
day funds. The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
beneficial interest in the Global Note to such persons may be limited.
QIBs who are not Participants may beneficially own interests in the Global
Note held by DTC only through Participants, or certain banks, brokers, dealers,
trust companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). So long as Cede, as the nominee of DTC, is the registered owner
of the Global Note, Cede for all purposes is considered the sole holder of the
Global Note.
Except as provided below, owners of beneficial interests in the Global Note
are not entitled to have certificates registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form and are not considered holders thereof.
Payment of interest on and the redemption price of the Global Note will be
made to Cede, the nominee of DTC, as the registered owner of the Global Note, by
wire transfer of immediately available funds on the applicable payment date
therefor. Neither the Company, the Trustee nor any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company has been informed by DTC that, with respect to any payment of
interest on, or the redemption price of, the Global Note, DTC's practice is to
credit Participants' accounts on the applicable payment date therefor with
payments in amounts proportionate to their respective beneficial interests in
the Notes represented by the Global Note, as shown on the records of DTC
(adjusted as necessary so that such payments are made with respect to whole
Notes only), unless DTC has reason to believe that it will not receive payment
on such payment date. Payments by Participants to owners of beneficial interests
in Notes represented by the Global Note held through such Participants will be
the responsibility of such Participants, as is now the case with securities held
for the accounts of customers registered in "Street name."
Holders who desire to convert their Notes into Common Stock pursuant to the
terms of the Notes should contact their brokers or other Participants or
Indirect Participants to obtain information on procedures, including proper
forms and cut-off times, for submitting such requests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Notes represented by the Global Note to pledge
such interest to persons or entities that do not participate in the DTC system,
or otherwise, take actions in respect of such interest, may be affected by the
lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paving agent or
conversion agent under the Indenture) have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a Holder of Notes (including, without limitation, the
presentation of Notes for exchange as described below), only at the direction of
one or more Participants to whose account DTC interests in the Global Note are
credited and only in respect of the principal amount of the Notes represented by
the Global Note as to which such Participant or Participants has or have given
such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities for its
Participants. DTC also facilitates the clearance and
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settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic book-entry changes to
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations such as the Initial Purchasers. Certain of such Participants (or
their representatives), together with other entities, own DTC. Indirect access
to the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through, or maintain a custodial relationship, with,
a Participant, either directly or indirectly. The rules applicable to DTC and
its Participants are on file with the Commission.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants of DTC, DTC is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depository and a successor depository is not appointed by
the Company within 90 days, the Company will cause Notes to be issued in
definitive form in exchange for the Global Note. None of the Company, the
Trustee nor any of their respective agents will have any responsibility for the
performance by DTC, its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records relating
to, or payments made on account of, beneficial ownership interests in Global
Notes.
CERTIFICATED NOTES. Subject to certain conditions, a beneficial interest in
the Global Note may be exchanged for Notes in certificated form ("Certificated
Securities"). Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). Certificated Notes may
be issued in exchange for Notes represented by the Global Note if no successor
depository is appointed by the Company as set forth above under "--Book Entry,
Delivery and Form."
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company has agreed to
file with the Commission the shelf registration statement of which this
Prospectus is a part covering resales by Holders of Notes and Common Stock
issuable upon conversion of the Notes within 90 days after the latest date of
initial issuance of the Notes, and to use its best efforts to cause such
registration statement to be declared effective within 120 days following such
filing. The Company will use all reasonable efforts to keep the registration
statement effective for two years from the latest date of initial issuance of
Notes. The Company will be permitted to suspend the use of this prospectus which
is a part of the shelf registration statement during certain periods of time and
under certain circumstances relating to pending corporate developments, public
filings with the Commission and similar events. If the prospectus is unavailable
for periods in excess of those permitted under the Registration Rights
Agreement, the Company has agreed to pay liquidated damages to (i) each Holder
of Notes at a rate equal to one-quarter of one percent per annum (25 basis
points) on the aggregate principal amount of the Notes and (ii) each holder of
shares of Common Stock issued upon conversion of the Notes at a rate equal to
one-quarter of one percent per annum (25 basis points) calculated on the product
of the then-applicable Conversion Price times the number of shares of such
Common Stock held by such holder. The Company will pay all expenses of the shelf
registration statement, provide to each registered Holder requesting to sell
Notes or shares of Common Stock copies of such prospectus, notify each
registered Holder when the shelf registration statement has become effective and
take certain other actions as are required to permit, subject to the foregoing,
unrestricted resales of the Securities. A Holder who sells the Notes pursuant to
the shelf registration statement generally will be required to be named as a
selling stockholder in the related prospectus and to deliver a prospectus to
purchasers and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such Holder (including certain indemnification
provisions). If a shelf registration statement covering the Common Stock issued
upon conversion of the Notes is not effective, such Common Stock may not be sold
or otherwise transferred except in accordance with the provisions set forth
under "Transfer Restrictions."
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The specific provisions relating to the registrations described above are
contained in the Registration Rights Agreement.
CONCERNING THE TRUSTEE
Chase Bank of Texas, N.A., the Trustee under the Indenture, has been
appointed by the Company as the initial paying agent, conversion agent,
registrar and custodian with regard to the Notes. The Company may maintain
deposit accounts and conduct other banking transactions with the Trustee or its
affiliates in the ordinary course of business, and the Trustee and its
affiliates may from time to time in the future provide banking and other
services to the Company in the ordinary course of their business.
CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York or Dallas,
Texas are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP.
"Change of Control" means (i) an event or series of events as a result of
which any "person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d) of the Exchange Act) (excluding the Company or any wholly-owned subsidiary
thereof) is or becomes, directly or indirectly, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable) of more than 50% of the combined voting power of the then
outstanding securities entitled to vote generally in elections of directors,
managers or trustees, as applicable, of the Company or any successor entity
("Voting Stock"), (ii) the completion of any consolidation with or merger of the
Company into any other Person, or conveyance, transfer or lease by the Company
of all or substantially all of its assets to any Person, or any merger of any
other Person into the Company in a single transaction or series of related
transactions, and, in the case of any such transaction or series of related
transactions, the outstanding Common Stock of the Company is changed or
exchanged as a result, unless the stockholders of the Company immediately before
such transaction own, directly or indirectly, immediately following such
transaction, at least a majority of the combined voting power of the outstanding
voting securities of the Person resulting from such transaction in substantially
the same proportion as their ownership of the Voting Stock immediately before
such transaction, or (iii) such time as the Continuing Directors (as defined) do
not constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided that a Change of
Control shall not be deemed to have occurred if either (x) the last sale price
of the Common Stock for any five trading days during the 10 trading days
immediately preceding the Change of Control is at least equal to 105% of the
Conversion Price in effect on such day, or (y) with respect to a merger or
consolidation otherwise constituting a Change of Control described in clause
(ii) above, at least 90% of the consideration in such transaction or
transactions consists of common stock or securities convertible into common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for quotation on the Nasdaq National Market.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on the date of initial issuance of
the Notes or (ii) who was nominated or elected by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Company's Board of Directors was recommended
or endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election.
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"Credit Facility" means the Credit Agreement, dated as of September 17,
1997, and as amended and restated on February 20, 1998, among the Company, the
lenders from time to time party thereto, First Union National Bank, as
administrative agent, and Fleet National Bank, as documentation agent, as the
same may from time to time be amended, modified, supplemented, restated,
renewed, refunded, restructured, refinanced, replaced or extended, in whole or
in part, whether with same or different agents or lenders thereunder.
"Disqualified Capital Stock" means, with respect to the Company, Capital
Stock of the Company that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of an event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the Holder thereof) by the Company, in
whole or in part, on or prior to the Stated Maturity of the Notes, provided that
only the portion of such Capital Stock which is so convertible, exercisable,
exchangeable or redeemable or subject to repurchase prior to such Stated
Maturity shall be deemed to be Disqualified Capital Stock.
"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money (whether or not the lender has recourse to all or any portion of
the assets of such person), (ii) evidenced by credit or loan agreements, bonds,
notes, debentures or similar instruments (including, without limitation, notes
or similar instruments given in connection with the acquisition or any business,
properties or assets of any kind), (iii) evidenced by bankers' acceptances or
similar instruments issued or accepted by banks, (iv) for the payment of money
relating to a Capitalized Lease Obligation, or (v) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (b) all obligations of such person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (c) all net
obligations of such person under Interest Swap and Hedging Obligations; (d) all
liabilities of others of the kind described in the preceding clauses (a), (b) or
(c) that such person has guaranteed or that is otherwise its legal liability, or
which is secured by a lien on property of such person, and all obligations to
purchase, redeem or acquire any Capital Stock; and (e) any and all deferrals,
renewals, extensions, modifications, replacements, restatements, refinancings
and refundings (whether direct or indirect) of, or any indebtedness or
obligation issued in exchange for, any liability of the kind described in any of
the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not
between or among the same parties.
"Interest Swap and Hedging Obligations" means the obligations of any Person
under any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement or other interest rate hedge agreement, interest rate collar agreement
or other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Junior Securities" means any Qualified Capital Stock (as defined) and any
Indebtedness of the Company that is fully subordinated in right of payment to
the Notes and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Notes.
"Qualified Capital Stock" means any Capital Stock of the Company that is not
Disqualified Capital Stock.
"Senior Indebtedness" means all obligations of the Company to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with, any
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the
Company, unless the instrument creating or evidencing such Indebtedness provides
that such Indebtedness is not senior or superior in right of payment to the
Notes or which is PARI PASSU with, or subordinated to, the
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Notes; provided that in no event shall Senior Indebtedness include (a)
Indebtedness of the Company owed or owing to any subsidiary of the Company or
any officer, director or employee of the Company or any subsidiary of the
Company, (b) Indebtedness representing or with respect to any account payable or
other accrued current liability or obligation incurred in the ordinary course of
business in connection with the obtaining of materials or services or (c) any
liability for taxes owed or owing by the Company or any subsidiary of the
Company. The Notes rank PARI PASSU with the Company's 6% Convertible
Subordinated Notes due 2001.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the Commission as in effect as of the date of the Indenture.
"Stated Maturity," when used with respect to any Note, means March 15, 2003.
"Subsidiary" with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such person a majority of the
partnership interests, or (iii) any other person (other than a corporation) in
which such person, one or more Subsidiaries of such person, or such person and
one or more Subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's Certificate of Incorporation provides that the authorized
capital stock of the Company consists of 120,000,000 shares of which 100,000,000
are shares of Common Stock, par value $.01 per share, and 20,000,000 are shares
of Preferred Stock, par value $.01 per share. As of May 5, 1998, 46,821,771
shares of Common Stock were issued and outstanding, and no shares of Preferred
Stock were issued or outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share owned of
record on all matters voted upon by the stockholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any series of Preferred Stock, the holders of such shares possess all
voting power. The Certificate of Incorporation does not provide for cumulative
voting for the election of directors. Thus, under the Delaware General
Corporation Law (the "DGCL"), the holders of more than one-half of the
outstanding shares of Common Stock generally elect all the directors of the
Company standing for election and the holders of the remaining shares do not
elect any director.
Subject to any preferential rights of any series of Preferred Stock, holders
of shares of Common Stock are entitled to receive dividends on such stock out of
assets legally available for distribution when, as and if authorized and
declared by the Board and to share ratably in the assets of the Company legally
available for distribution to its stockholders in the event of its liquidation,
dissolution or winding up.
Holders of Common Stock will have no preferences or preemptive, conversion
or exchange rights.
ChaseMellon Shareholder Services, L.L.C. acts as the transfer agent and
registrar for the Common Stock.
PREFERRED STOCK
The Board is authorized to issue shares of Preferred Stock, in one or more
series, and to fix for each series the number of shares thereof and voting
powers and such preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions as are
permitted by the DGCL. The Board can authorize the issuance of shares of
Preferred Stock with terms and conditions that could discourage a takeover or
other transaction that the holders of some or a majority of shares of Common
Stock might believe to be in their best interests or in which such holders might
receive a premium for their shares of stock over the then market price of such
shares. As of the date hereof, no shares of Preferred Stock are outstanding.
STOCKHOLDER RIGHTS PLAN
The Board of Directors declared, pursuant to a rights agreement (the "Rights
Agreement"), a dividend distribution of one common share purchase right
("Right") for each outstanding share of Common Stock. Each Right entitles the
registered holder to purchase from the Company one thousandth of a share of
Series A Junior Participating Preferred Stock, par value $.01 per share (the
"Junior Preferred Shares"), of the Company at a price of $170.00 per share (the
"Purchase Price"), subject to adjustment. Each thousandth of a Junior Preferred
Share will be economically equivalent to one share of Common Stock. The Purchase
Price is expected to be significantly higher than the trading price of the
Common Stock. Therefore, the dividend will have no initial value and no impact
on the financial statements of the Company. The following summary of the Rights
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement.
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Initially, the Rights are attached to all certificates representing shares
of Common Stock outstanding, and no separate certificates representing the
Rights will be distributed. Subject to extension by a majority of the Continuing
Directors (as defined in the Rights Agreement) acting on behalf of the Company,
the Rights will separate from the Common Stock upon the Distribution Date, which
is defined as the earlier of (a) ten days following a public announcement that a
person or group of affiliated or associated persons has acquired, or obtained
the right to acquire, beneficial ownership of 15% or more of the outstanding
shares of Common Stock or that a majority of the Continuing Directors has
identified a person or group of affiliated or associated persons as holding a
substantial interest in the Company (which interest must be 10% or more of the
outstanding shares of Common Stock) with an intent that is adverse to the
Company (any of the foregoing persons being an "Acquiring Person"), or (b) ten
business days following the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 15% or more of such
outstanding shares of Common Stock. Until the Distribution Date, (i) the Rights
will be evidenced by the Common Stock certificates and will be transferred with
and only with the Common Stock certificates, (ii) all certificates representing
shares of Common Stock will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer any certificate for
Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by that certificate. As soon as
practicable after the Distribution Date, separate certificates evidencing the
Rights will be mailed to holders of record of the Common Stock.
The Rights are not exercisable until the Distribution Date and will expire
ten years after issuance, unless earlier redeemed by the Company.
In the event that, at any time following the Distribution Date, (a) the
Company is the surviving corporation in a merger or combination with an
Acquiring Person and the shares of Common Stock shall remain outstanding and not
be changed or exchanged, (b) a person becomes the beneficial owner of 15% or
more of the then outstanding shares of Common Stock, (c) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement or (d) a person is determined to hold a substantial interest in the
Company (which interest must be 10% or more of the outstanding shares of Common
Stock) with an intent that is adverse to the Company, each holder of a Right
will thereafter have the right to receive, upon exercise, Junior Preferred
Shares (or, in certain circumstances, Common Stock, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. For example, at an exercise price of $170.00 per Right, each Right
now owned by an Acquiring Person following an event described above would
entitle its holder to purchase from the Company $340.00 worth of Junior
Preferred Shares (or in certain circumstances, Common Stock, cash, property or
other securities of the Company) for $170.00. Assuming that the Common Stock had
a current market price per share of $20.00 at that time, the holder of each
valid Right would be entitled to purchase ten one-thousandths of Junior
Preferred Shares for $170.00. Notwithstanding the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by an Acquiring Person will be null and void. However, Rights
are not exercisable following the occurrence of any of the events set forth
above until such time as the Rights are no longer redeemable by the Company as
set forth below.
In the event that, at any time following the date that a person has become
an Acquiring Person (the "Shares Acquisition Date"), (a) the Company is acquired
in a merger or other combination transaction in which the Company is not the
surviving entity, (b) the Company consolidates with or merges with or into any
other person pursuant to which the Company is the surviving entity but all or a
part of the shares of Common Stock are changed into or exchanged for stock of
another person or cash or other property or (c) 50% or more of the Company's
assets or earning power is sold or transferred, each holder of a Right (except
Rights that previously have been voided as described above) shall thereafter
have the right to receive, upon exercise, common stock or other securities of
the acquiring company having a value equal to two times the exercise price of
the Right.
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The Purchase Price payable and the number of Junior Preferred Shares or
other securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (a) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Stock, (b) upon the grant to holders of Common Stock of certain rights or
warrants to subscribe for Common Stock or convertible shares securities at less
that the current pre-share market price of the Common Stock or (c) upon the
distribution to holders of Common Stock of evidence of indebtedness or assets of
the Company (excluding regular periodic cash dividends at a rate approved by the
majority of Continuing Directors or dividends payable in Common Stock) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment to the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% to
the Purchase Price. Upon the exercise of a Right, the Company will not be
required to issue fractional Junior Preferred Shares or fractional shares of
Common Stock (other than fractions in multiples of one one-thousandths of a
Junior Preferred Share) and, in lieu thereof, an adjustment in cash may be made
based on the market price of the Junior Preferred Shares or Common Stock on the
last trading date prior to the date of exercise.
At any time until 15 business days following the Shares Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right, payable in cash. Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that any of the Rights are
exercised for Common Stock (or other consideration) or for common stock or other
securities of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement, other than those provisions
relating to the principal economic terms of the Rights, may be amended by the
Board of Directors before the Distribution Date, and no stockholder approval
will be sought for noneconomic amendments to the Rights Agreement except as
required by law or by the rules of any national securities exchange on which the
Common Stock is then listed. After the Distribution Date, the provisions of the
Rights Agreement may be amended by the Board of Directors to cure any ambiguity,
to make changes that do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person) or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
adjust the time period governing redemption may be made when the Rights are not
redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to any person or group that attempts to acquire the Company
without conditioning the offer on the acquisition of a substantial number of
Rights. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors because the Board of Directors
may, at its option, at any time before the close of business on the earlier of
the 15th day following the Shares Acquisition Date or ten years after the
Effective Date, redeem all, but not less than all, of the then outstanding
Rights at $.01 per Right.
CERTAIN CORPORATE GOVERNANCE MATTERS
GENERAL. Certain provisions of the Certificate of Incorporation, the Bylaws
and the DGCL may have the effect of impeding the acquisition of control of the
Company by means of a tender offer, a proxy fight, open market purchases or
otherwise in a transaction not approved by the Board.
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The provisions of the Certificate of Incorporation, the Bylaws and the DGCL
described below are designed to reduce, or have the effect of reducing, the
vulnerability of the Company to an unsolicited proposal for the restructuring or
sale of all or substantially all of the assets of the Company or an unsolicited
takeover attempt that is unfair to the Company stockholders. The summary of such
provisions set forth below does not purport to be complete and is subject to and
qualified in its entirety by reference to the Certificate of Incorporation,
Bylaws and the DGCL.
CLASSIFIED BOARD. The Certificate of Incorporation provides that the Board
is divided into three classes, and, after an initial term, each director will be
elected for a three-year term.
BUSINESS COMBINATIONS. Section 203 of the DGCL restricts a wide range of
transactions ("business combinations") between a corporation and an interested
stockholder. An "interested stockholder" is, generally, any person who
beneficially owns, directly or indirectly, 15% or more of the corporation's
outstanding voting stock. Business combinations are broadly defined to include
(i) mergers or consolidations with, (ii) sales or other dispositions of more
than 10% of the corporation's assets to, (iii) certain transactions resulting in
the issuance or transfer of any stock of the corporation or any subsidiary to,
(iv) certain transactions which would result in increasing the proportionate
share of stock of the corporation or any subsidiary owned by, or (v) receipt of
the benefit (other than proportionately as a stockholder) of any loans, advances
or other financial benefits by, an interested stockholder Section 203 provides
that an interested stockholder may not engage in a business combination with the
corporation for a period of three years from the time of becoming an interested
stockholder unless (i) the board of directors approved either the business
combination or the transaction which resulted in the person becoming an
interested stockholder prior to the time such person became an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
person becoming an interested stockholder, that person owned at least 85% of the
corporation's voting stock (excluding shares owned by persons who are officers
and also directors and shares owned by certain employee sock plans) or (iii) the
business combination is approved by the board of directors and authorized by the
affirmative vote of at least two-thirds of the outstanding voting stock not
owned by the interested stockholder. The restrictions on business combinations
with interested stockholders contained in Section 203 do not apply to a
corporation whose certificate of incorporation contains a provision expressly
electing not to be governed by the statute. The Certificate of Incorporation
does not contain a provision electing to "opt-out" of Section 203.
SPECIAL MEETINGS; PROHIBITION OF ACTIONS BY WRITTEN CONSENT. Pursuant to
the DGCL, a special meeting of stockholders may be called by the board of
directors or by any other person authorized to do so in the certification of
incorporation or the bylaws. The Certificate of Incorporation provides that
special meetings of stockholders may only be called by the Board, the Chairman
of the Board or the President of the Company. In addition, the Certificate of
Incorporation provides that any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting, and may not be taken by a written
consent of the stockholders.
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DESCRIPTION OF 6% CONVERTIBLE NOTES DUE 2001
The 6% Convertible Notes due 2001 (the "6% Notes") were issued pursuant to
an indenture (the "6% Note Indenture") dated as of December 24, 1996, by and
between OccuSystems and United States Trust Company of New York, as trustee (the
"UST"). The 6% Note Indenture was assumed by the Company pursuant to a
supplemental indenture upon consummation of the Mergers. The following summary
of the terms of the 6% Notes and the 6% Note Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by, reference to
all of the provisions of the 6% Note Indenture. Capitalized terms used herein
without definition have the meanings ascribed to them in the 6% Note Indenture.
GENERAL
Upon consummation of the Mergers, the Company assumed an aggregate of up to
$97,750,000 in principal amount of the 6% Notes. The 6% Notes are convertible
into 3,291,243 shares of Common Stock at the initial conversion price (the
"Conversion Price") of $29.70 per share (equivalent to a conversion rate of
33.67 shares per $1,000 principal amount of the 6% Notes), subject to adjustment
in certain events.
The 6% Notes mature on December 15, 2001. Interest on the 6% Notes is
payable semi-annually on June 15 and December 15 of each year, commencing on
June 15, 1997.
The 6% Indenture does not contain any financial covenants or any
restrictions on the payment of dividends, the repurchase of securities of the
Company or the incurrence of Senior Indebtedness.
SUBORDINATION
The 6% Notes are general, unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company to the same extent as the Notes are subordinated.
REDEMPTION AT THE COMPANY'S OPTION
The 6% Notes will not be subject to redemption prior to December 15, 1999
and will be redeemable thereafter at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice to each holder, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing December 15 of the years
indicated below, in each case (subject to the right of holders of record on a
Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date) together with accrued and unpaid interest, if
any, to, but excluding, the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- -----------
<S> <C>
1999.......................................................... 102.4%
2000.......................................................... 101.2
</TABLE>
In the case of a partial redemption, the Trustee shall select the 6% Notes
or portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The 6% Notes may be redeemed in part in
multiples of $1,000 only.
The 6% Notes do not have the benefit of any sinking fund.
REPURCHASE OF 6% NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The 6% Note Indenture provides that in the event that a Change of Control
has occurred, each holder of 6% Notes will have the right, at such holder's
option, pursuant to an irrevocable and unconditional offer by the Company, to
require Concentra to repurchase all or any part of such holder's 6% Notes
(provided that the principal amount of such 6% Notes must be $1,000 or an
integral multiple thereof) on the date
32
<PAGE>
that is no later than 50 Business Days after the occurrence of such Change of
Control at a cash price equal to 100% of the principal amount thereof, together
with accrued and unpaid interest if any, to (but excluding) the date of
repurchase.
SELLING SECURITY HOLDERS
The Notes were originally issued by the Company in a private placement and
were resold by the Initial Purchasers thereof to QIBs in transactions exempt
from registration under the Securities Act. The Notes and the Common Stock
issuable upon conversion of the Notes that may be offered pursuant to this
Prospectus will be offered by the Selling Securityholders.
Prior to any use of this Prospectus in connection with an offering of the
Notes and the underlying Common Stock (the "Securities"), this Prospectus will
be supplemented to set forth the name and number of shares beneficially owned by
the Selling Securityholder intending to sell such Securities, and the aggregate
principal amount of Notes and number of shares of Common Stock issuable upon
conversion of the Notes to be offered. The Prospectus Supplement will also
disclose whether any Selling Securityholder selling in connection with such
Prospectus Supplement has held any position or office with, been employed by or
otherwise has had a material relationship with, the Company or any of its
affiliates during the three years prior to the date of the Prospectus
Supplement.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States Federal income
tax consequences relating to an investment in the Notes as of the date hereof.
This discussion is based on existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations promulgated thereunder,
judicial decisions and administrative rulings, all of which are subject to
change or alternative construction with possible retroactive effect. This
summary does not discuss other Federal taxes (such as Federal estate and gift
taxes) or any state, local or foreign tax considerations, nor does it purport to
address all Federal income tax consequences applicable to all categories of
investors, some of whom may be subject to special rules, such as Non-U.S.
Holders (as defined below), life insurance companies, tax-exempt organizations,
dealers in securities or currency, banks or other financial institutions,
investors whose functional currency is not the U.S. dollar, persons who enter
into "short sales against the box" or certain other "constructive sales"
involving the Notes or Common Stock or substantially identical property, or
investors that hold the Notes as part of a hedge, straddle or conversion
transaction. For purposes of this discussion, it is assumed that the Company is
not a collapsible corporation within the meaning of Section 341 of the Code. In
addition, this summary is generally limited to the Notes and the Common Stock
into which the Notes are convertible which are held as "capital assets" within
the meaning of Section 1221 of the Code and is limited to Initial Purchasers who
purchase the Notes at their initial offering price pursuant to this offering.
The Company will not seek a ruling from the Internal Revenue Service (the "IRS")
with regard to the United States Federal income tax treatment relating to an
investment in the Notes (or the Common Stock into which the Notes are
convertible) and, therefore, there can be no assurance that the IRS will agree
with the conclusions set forth below.
For purposes of this summary, the term "U.S. Holder" means a beneficial
owner of a Note or Common Stock that is (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof,
(iii) an estate the income of which is subject to United States Federal income
taxation regardless of its source, and (iv) a trust if (a) a U.S. court is able
to exercise primary supervision over the trust's administration and (b) one or
more U.S. fiduciaries have the authority to control all of the trust's
substantial decisions. The term "Non-U.S. Holder" shall mean the beneficial
owner of a Note or Common Stock other than a U.S. Holder.
33
<PAGE>
PERSONS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL TAX LAWS, AS WELL
AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR
PARTICULAR SITUATIONS. THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF
FEDERAL, STATE, LOCAL OR FOREIGN TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S
DECISION TO PURCHASE THE NOTES.
TAXATION OF U.S. HOLDERS
ADJUSTMENT TO CONVERSION PRICE. Section 305 of the Code treats as a taxable
distribution certain actual or constructive distributions of stock with respect
to stock and convertible securities. Applicable Treasury regulations treat
holders of convertible debentures as having received such a constructive
distribution where the conversion price is adjusted to reflect certain
distributions with respect to the stock into which such debentures are
convertible. Thus, under certain circumstances, an adjustment in the conversion
price of the Notes may be taxable to U.S. Holders as a taxable dividend
distribution. Adjustments to the conversion price, however, made pursuant to a
bona fide, reasonable adjustment formula which has the effect of preventing the
dilution of the interest of the holders of such securities, generally will not
be considered to result in a constructive distribution of stock. The Indenture
provides that the conversion price will be adjusted upon the occurrence of
certain circumstances. There can be no assurance that some of the adjustments,
more fully described in the Indenture, would not result in a taxable
constructive distribution to U.S. Holders. In such a case, U.S. Holders may
recognize income as a result of an event pursuant to which they receive no cash
or property that could be used to pay the related income tax. Holders of the
Notes are advised to consult their tax advisors with respect to the potential of
taxable constructive dividend distributions upon such conversion price
modifications.
PAYMENTS OF INTEREST. The payment of stated interest on the Notes will be
taxable to a U.S. Holder as ordinary interest income at the time it accrues or
is received in accordance with the U.S. Holder's usual method of accounting for
Federal income tax purposes. The Company will characterize and treat the Notes
as debt for income tax purposes.
CONVERSION OF A NOTE INTO COMMON STOCK. In general, a U.S. Holder will not
recognize gain or loss on conversion of a Note solely into Common Stock pursuant
to the terms of the conversion right of the Notes, except with respect to cash
received in lieu of a fractional share. The holding period of the Common Stock
received by the U.S. Holder upon conversion of a Note will include the period
during which the Note was held prior to the conversion. The U.S. Holder's
aggregate tax basis in the Common Stock (including the fractional share
exchanged for cash) received upon conversion of a Note will equal the U.S.
Holder's aggregate tax basis in the Note exchanged at the time of conversion. A
U.S. Holder generally will recognize capital gain or loss in connection with any
cash received in lieu of a fractional share in an amount equal to the difference
between the amount of cash received and the U.S. Holder's tax basis in the
fractional share. Special Federal income tax rules for the treatment of the
conversion of a Note into Common Stock may apply if a U.S. Holder converts after
a record date for the payment of interest, but prior to the next succeeding
interest payment date (for instance, the fair market value of Common Stock
received which is attributable to accrued interest will be taxable as ordinary
interest income in certain circumstances). U.S. Holders should consult their own
tax advisors regarding the tax consequences of converting the Notes into Common
Stock. Certain additional consequences could apply upon conversion with respect
to the receipt of Rights under the Company's Rights Plan.
DISPOSITION OF NOTES OR COMMON STOCK. A U.S. Holder of a Note (or the
Common Stock into which it was converted) generally will recognize capital gain
or loss upon the sale, exchange, retirement or other disposition of the Note (or
the Common Stock) measured by the difference between (i) the amount realized
(except to the extent the amount is attributable to accrued interest income,
which will generally be taxable as ordinary income) and (ii) the U.S. Holder's
tax basis in the Note (or the Common Stock). The
34
<PAGE>
gain or loss on such disposition will be long-term capital gain or loss if the
Note (or the Common Stock) has been held for more than one year at the time of
such disposition. Under recently enacted legislation, long-term capital gain of
an individual taxpayer currently is subject to a maximum income tax rate of
either (i) 20.0% if the individual held the asset for more than 18 months or
(ii) 28.0% if the individual held the asset for more than one year, but not more
than 18 months.
DISTRIBUTIONS WITH RESPECT TO COMMON STOCK. In general, distributions made
by the Company with respect to Common Stock will be taxable to a holder as
ordinary dividend income to the extent of the Company's undistributed current or
accumulated earnings and profits (as determined for Federal income tax
purposes). Distributions in excess of the Company's current or accumulated
earnings and profits will be treated first as a nontaxable return of capital
reducing the U.S. Holder's tax basis in the Common Stock, thus increasing the
amount of any gain (or reducing the amount of any loss) which might be realized
by such U.S. Holder upon the sale, exchange or redemption of such Common Stock.
Any such distributions in excess of the U.S. Holder's tax basis in the Common
Stock will be treated as capital gain to the U.S. Holder (provided the Common
Stock is held as a capital asset) and will be either long-term or short-term
capital gain depending upon the holder's Federal income tax holding period for
the Common Stock.
To the extent that distributions made by the Company are treated as
dividends, a U.S. Holder of Common Stock that is taxed as a domestic corporation
and that meets the applicable holding period and taxable income requirements of
the Code may be entitled to a deduction under Section 243 of the Code equal in
amount to 70.0% of such dividends (the "Dividends Received Deduction"). With
respect to Common Stock considered to be "debt financed portfolio stock," as
defined in Section 246A of the Code, the Dividends Received Deduction will be
reduced in accordance with the formula contained in that Section. The receipt of
a dividend on the Common Stock determined to be an "extraordinary dividend" may
cause the holder's tax basis in the Common Stock to be reduced by the untaxed
portion of the dividend pursuant to Section 1059 of the Code, with any excess of
such untaxed portion of the dividend over such tax basis then treated, pursuant
to recently enacted legislation, as gain from the sale or exchange of such
Common Stock for the taxable year in which the extraordinary dividend is
received. Individuals, partnerships and other entities not taxable as domestic
corporations, and certain corporations having a special tax status (such as, for
example, status as an S corporation) are not eligible for the Dividends Received
Deduction.
The Clinton Administration had proposed legislation that would reduce the
Dividends Received Deduction, but such proposal was not enacted into law. It is
impossible to predict whether, or in what form, any legislation affecting the
Dividends Received Deduction might be enacted into law in the future. U.S.
Holders should consult their own tax advisors regarding the availability of the
Dividends Received Deduction.
TAXATION OF NON-U.S. HOLDERS
ADJUSTMENT TO CONVERSION PRICE. As discussed above under "Taxation of U.S.
Holders--Adjustment to Conversion Price," in certain circumstances an adjustment
in the conversion price of the Notes may be taxable as a dividend. Generally,
such a deemed dividend to a Non-U.S. Holder would be subject to a withholding
tax at a 30.0% rate (or, if applicable, a lower treaty rate). However, if such
deemed dividend is effectively connected with a United States trade or business,
except to the extent otherwise provided under an applicable tax treaty, a
Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to such deemed dividend, and a corporate Non-U.S. Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a
30.0% rate (or, if applicable, a lower treaty rate). Any such effectively
connected deemed dividend will generally not be subject to withholding if the
Non-U.S. Holder delivers an IRS Form 4224 to the payor.
PAYMENTS OF INTEREST. The payment of stated interest on a Note by the
Company or any paying agent to a Non-U.S. Holder will qualify for the "portfolio
interest exemption" and, therefore, will not be subject
35
<PAGE>
to United States Federal income tax or withholding tax, provided that such
interest income is not taxable as effectively connected with a United States
trade or business of the Non-U.S. Holder and the Non-U.S. Holder (i) does not
actually or constructively own 10.0% or more of the combined voting power of all
classes of stock of the Company entitled to vote, (ii) is not a controlled
foreign corporation related to the Company actually or constructively through
stock ownership, (iii) is not a bank receiving interest on a loan entered into
in the ordinary course of business, and (iv) either (a) provides an IRS Form W-8
(or suitable substitute form) signed under penalties of perjury that includes
its name and address and certifies as to its non-United States status in
compliance with applicable law and regulations, or (b) deposits the Note with a
securities clearing organization, bank or financial institution that holds
customers' securities in the ordinary course of its trade or business and which
holds the Note and provides a statement to the Company or its agent under
penalties of perjury in which it certifies that such a Form W-8 (or a suitable
substitute) has been received by it from the Non-U.S. Holder or qualified
intermediary and furnishes the Company or its agent with a copy thereof.
Recently issued Treasury regulations (the "Final Regulations") would provide
alternative methods for satisfying the certification requirement described in
clause (iv) above. The Final Regulations also would generally require, in the
case of Notes held by a foreign partnership, that (a) the certification
described in clause (iv) above be provided by the partners rather than by the
foreign partnership, and (b) the partnership provide certain information,
including a United States taxpayer identification number. A look-through rule
would apply in the case of tiered partnerships. The Final Regulations are
effective for payments made after December 31, 1998. Non-U.S. Holders of the
Notes are advised to consult their tax advisors with respect to their
qualification for the portfolio interest exemption and the steps necessary to
comply with such exemption.
Except to the extent otherwise provided under an applicable tax treaty, a
Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to interest on a Note if such interest income is effectively connected
with a United States trade or business of the Non-U.S. Holder. Effectively
connected interest received by a corporate Non-U.S. Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a
30.0% rate (or, if applicable, a lower treaty rate). Such effectively connected
interest will generally not be subject to withholding tax if the Non-U.S. Holder
delivers an IRS Form 4224 to the payor.
Interest income of a Non-U.S. Holder that is not effectively connected with
a United States trade or business and that does not qualify for the portfolio
interest exemption described above will generally be subject to a withholding
tax at a 30.0% rate (or, if applicable, a lower treaty rate).
CONVERSION OF A NOTE INTO COMMON STOCK. In general, no United States
Federal income tax or withholding tax will be imposed upon the conversion of a
Note into Common Stock by a Non-U.S. Holder except that with respect to the
receipt of cash in lieu of fractional shares by Non-U.S. Holders upon conversion
of a Note, tax will be imposed where any one of the three exceptions described
below under "Disposition of Notes" is applicable. In addition, under certain
circumstances, the extent to which the fair market value of the Common Stock
received upon conversion is attributable to accrued interest will be treated as
ordinary interest income taxable as described above under "--Payments of
Interest."
DISPOSITION OF NOTES. A Non-U.S. Holder of a Note will generally not be
subject to United States Federal income tax or withholding tax on any gain
realized on the sale, exchange, retirement or other disposition of the Note
(including the receipt of cash in lieu of fractional shares upon conversion of
the Note into Common Stock), unless (i) the gain is effectively connected with a
United States trade or business of the Non-U.S. Holder, (ii) in the case of a
Non-U.S. Holder who is an individual, such holder is present in the United
States for a period or periods aggregating 183 days or more during the taxable
year of the disposition, and either such holder has a "tax home" in the United
States or the disposition is attributable to an office or other fixed place of
business maintained by such holder in the United States, or
36
<PAGE>
(iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of the
Code applicable to certain United States expatriates.
DISPOSITION OF COMMON STOCK. A Non-U.S. Holder generally will not be
subject to United States Federal income tax or withholding tax on the sale or
exchange of Common Stock unless any of the three conditions described above
under "--Disposition of Notes" is satisfied.
FIRPTA TREATMENT OF NON-U.S. HOLDERS. The foregoing discussion under the
headings "Conversion of a Note into Common Stock," "Disposition of Notes," and
"Disposition of Common Stock" is based on the Company's conclusion that it is
not presently a United States real property holding corporation (a "USRPHC")
subject to the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA").
Different consequences would apply to certain Non-U.S. Holders if the Company
were to become a USRPHC subject to FIRPTA. Notwithstanding the foregoing, under
special FIRPTA withholding rules, a purchaser of the Notes, or Common Stock into
which the Notes are converted, from a Non-U.S. Holder will be required to
withhold from the gross proceeds a 10% U.S. withholding tax unless certain
certificates are supplied to the purchaser or other exceptions apply. Non-U.S.
Holders of Notes should consult their tax advisors regarding such FIRPTA
withholding requirements and any available exemption.
DISTRIBUTIONS WITH RESPECT TO COMMON STOCK. To the extent distributions
made by the Company are treated as dividends (as described above under "Taxation
of U.S. Holders--Distributions with Respect to Common Stock"), a Non-U.S. Holder
will be subject to United States Federal withholding tax at a 30.0% rate (or
lower rate provided under an applicable income tax treaty) on dividends paid (or
deemed paid, as described above under "Taxation of U.S. Holders--Adjustment to
Conversion Price") on Common Stock, unless the dividends are taxable as
effectively connected with the conduct of a trade or business in the United
States and the Non-U.S. Holder delivers IRS Form 4224 to the payor. Except to
the extent otherwise provided under an applicable tax treaty, a Non-U.S. Holder
generally will be taxed in the same manner as a U.S. Holder on dividends paid
(or deemed paid) that are effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Holder. If such Non-U.S. Holder is
a foreign corporation. it may also be subject to a United States branch profits
tax on such effectively connected income at a 30.0% rate or such lower rate as
may be specified by an applicable income tax treaty.
Under Treasury regulations as presently in effect, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding rules discussed below and, under the current interpretation of
Treasury regulations, for purposes of determining the applicability of a tax
treaty rate. Under the Final Regulations, however, a Non-U.S. Holder of Common
Stock who wishes to claim the benefit of an applicable treaty rate would be
required to satisfy applicable certification requirements. In addition, under
the Final Regulations, in the case of Common Stock held by a foreign
partnership, the certification requirement would generally be applied to the
partners of the partnership and the partnership would be required to provide
certain information, including a United States taxpayer identification number.
The Final Regulations also provide look-through rules for tiered partnerships.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States Federal income tax law, certain non-corporate
U.S. Holders of Notes or Common Stock will be subject to information reporting
and, under certain circumstances, may be subject to "backup withholding" at the
rate of 31.0% in respect to payments of principal, interest and dividends, and
the proceeds of disposition of Notes or Common Stock. Generally, the backup
withholding rules will apply only if the U.S. Holder (i) fails to furnish its
taxpayer identification number ("TIN") to the payor, (ii) furnishes such payor
with an incorrect TIN, (iii) is notified by the IRS that it has failed to report
properly interest, dividends or other "reportable payments", as defined by the
Code, or (iv) under certain circumstances, fails to provide such payor or the
U.S. Holder's securities broker with a certified statement,
37
<PAGE>
signed under penalty of perjury, that the `TIN provided is its correct number
and that the U.S. Holder is not subject to backup withholding. Backup
withholding will not apply with respect to payments made to certain U.S. Holders
of the Notes, including corporations and tax-exempt organizations.
Payments or distributions to a Non-U.S. Holder with respect to a Note or
Common Stock, and the proceeds from a disposition of a Note or Common Stock by a
Non-U.S. Holder, will generally not be subject to backup withholding or to
information reporting requirements unless the Non-U.S. Holder fails to comply
with certain reporting procedures, the payment is received through a United
States office of a broker, or the Non-U.S. Holder fails to establish an
exemption from such tax or information reporting requirements under applicable
provisions of the Code.
Holders of Notes should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption. The amount of any backup withholding from a payment
to a holder should be allowed as a credit against such person's United States
Federal income tax liability and may entitle such person to a refund, provided
that the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
Pursuant to the Registration Rights Agreement entered into in connection
with the Note Offering, the Registration Statement of which this Prospectus
forms a part was filed with the Commission covering the resale of the Notes and
the Common Stock issuable upon the conversion of the Notes (the "Securities").
The Company has agreed to use all reasonable efforts to keep the Registration
Statement effective for two years from the latest date of initial issuance of
the Notes. The Company will be permitted to suspend the use of this Prospectus
(which is a part of the Registration Statement) during certain periods of time
under certain circumstances relating to pending corporate developments, public
filings with the Commission and similar events. The specific provisions relating
to the registration rights described above are contained in the Registration
Rights Agreement, and the foregoing summary is qualified in its entirety by
reference to the provisions of such agreement.
Sales of the Securities may be effected by or for the account of the Selling
Securityholders from time to time in transactions (which may include block
transactions in the case of shares of Common Stock) on any exchange or market on
which such Securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling the
Securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders, or to broker-dealers who may purchase the
Securities as principals and thereafter sell the Securities from time to time in
transactions (which may include block transactions in the case of shares of
Common Stock) on any exchange or market on which such Securities are listed or
quoted, as applicable, in negotiated transactions, through a combination of such
methods of sale, or otherwise. In effecting sales, broker-dealers engaged by
Selling Securityholders may arrange for other broker-dealers to participate.
Such broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers of the Securities for whom such broker-dealers may act as agents or
to whom they may sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such persons and any profits received on the resale of the Securities
offered hereby and purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
38
<PAGE>
Pursuant to the Registration Rights Agreement, the Company has agreed to pay
expenses incident to the offer and sale of the Securities offered by the Selling
Securityholders hereby, except that the Selling Securityholders will pay all
underwriting discounts and selling commissions, if any. The Company has agreed
to indemnify the Selling Securityholders against certain liabilities, including
liabilities under the Securities Act, and to contribute to payments the Selling
Securityholders may be required to make in respect hereof.
To comply with the Securities laws of certain jurisdictions, if applicable,
the Securities offered hereby will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. Under applicable rules and
regulations under the Exchange Act, any person engaged in a distribution of the
Securities may be limited in its ability to engage in market activities with
respect to such Securities. In addition, to and without limiting the foregoing,
each Selling Securityholder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Selling Securityholders.
The foregoing may affect the marketability of the Securities.
In addition, any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 or 144A of the Securities Act may be sold under Rule 144 or
144A rather than pursuant to this Prospectus. There can be no assurance that any
Selling Securityholder will sell any or all of the Notes or Common Stock
described herein, and any Selling Securityholder may transfer, devise or gift
such securities by other means not described herein.
LEGAL MATTERS
The validity of the issuance of the Notes offered hereby and the validity of
the Common Stock issuable upon conversion of the Notes will be passed upon for
the Company by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston,
Massachusetts.
EXPERTS
The consolidated financial statements of Concentra as of December 31, 1997,
incorporated into this Prospectus by reference to the Concentra Form 10-K have
been so incorporated in reliance on the report of Arthur Andersen LLP,
independent public accountants, given on the authority of such firm as experts
in accounting and auditing.
The consolidated financial statements of PPS as of December 31, 1997, and
for each of the three fiscal years ended December 31, 1997, 1996 and 1995,
incorporated into this Prospectus by reference to the Concentra Form 8-K/A filed
April 22, 1998 have been so incorporated in reliance on the report of Arthur
Andersen LLP, independent public accountants, given on the authority of such
firm as experts in accounting and auditing.
39
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE INITIAL PURCHASERS OR ANY OF THEIR RESPECTIVE AFFILIATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY ANY PERSON IN ANY
JURISDICTION IN WHICH OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION
CONTAINED IN THIS PROSPECTUS OR ANY DOCUMENT INCORPORATED BY REFERENCE HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information............................ 1
Incorporation of Certain Documents by
Reference...................................... 1
Summary.......................................... 2
Risk Factors..................................... 6
Use of Proceeds.................................. 12
Description of Notes............................. 13
Description of Capital Stock..................... 28
Description of 6% Convertible Notes due 2001..... 32
Selling Security Holders......................... 33
Certain Federal Income Tax Considerations........ 33
Plan of Distribution............................. 39
Legal Matters.................................... 39
Experts.......................................... 39
</TABLE>
$230,000,000
[LOGO]
4.50% CONVERTIBLE SUBORDINATED
NOTES DUE 2003
------------
PROSPECTUS
------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The expenses in connection with the issuance and distribution of the
securities being registered hereby are estimated as follows:
<TABLE>
<CAPTION>
<S> <C>
Registration fee under Securities Act............................. $ 67,850
Nasdaq fee........................................................ $ 11,500
Legal fees and expenses........................................... $ 50,000
Accounting fees and expenses...................................... $ 50,000
Fees and Expenses of Transfer Agent............................... $ 10,000
Miscellaneous..................................................... $ 15,000
Total......................................................... $ 204,350
</TABLE>
- ------------------------
* All amounts are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides as
follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgment, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of
II-1
<PAGE>
this section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the board of
directors who are not parties to such action, suite or proceeding, even though
less than a quorum, or (2) if there are not such directors, or, if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to the corporation shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to other enterprises shall
include employee benefit plans; references to fines shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to serving at the request of the corporation shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner not
opposed to the best interests of the corporation as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has
II-2
<PAGE>
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Article Twelfth of the Certificate of Incorporation of the Company provides in
relevant part as follows:
No director of the corporation shall be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. In addition to the
circumstances in which a director of the corporation is not personally liable as
set forth in the preceding sentence, a director of the corporation shall not be
liable to the fullest extent permitted by any amendment to the Delaware General
Corporation Law hereafter enacted that further limits the liability of a
director.
Article VI of the Bylaws of the Company provides in relevant part as follows:
SECTION1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding'), by reason of the fact that he or she or a person
of whom he or she is the legal representative, is or was or has agreed to become
a director or officer of the Corporation or is or was serving or has agreed to
serve at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving or having agreed to
serve as a director of officer, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended, (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) against all expense, liability
and loss (including without limitation, attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to serve in the
capacity which initially entitled such person to indemnity hereunder and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) other than a
proceeding (or part thereof) brought under Section 3 of this Article VI
indicated by such person or his or her heirs, executors and administrators only
if such proceeding (or part thereof) was authorized by the board of directors of
the Corporation. The right to indemnification conferred in this Article VI shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a current, former or proposed
director or officer in his or her capacity as a director or officer or proposed
director or officer (and not in any other capacity in which service was or is or
has been agreed to be rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such indemnified person,
to repay all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Section or
otherwise.
SECTION 2. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, by
action of its Board of Directors, provide indemnification to employees and
agents of the Corporation, individually or as a group, with the same scope and
effect as the indemnification of directors and officers provided for in this
Article.
II-3
<PAGE>
SECTION 3. RIGHT OF CLAIMANT TO BRING SUIT. If a written claim received by
the Corporation from or on behalf of an indemnified party under this Article VI
is not paid in full by the Corporation within ninety days after such receipt,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
SECTION 4. NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement and payment of expenses conferred in this Article VI shall not be
exclusive of any other right which any person may have or hereafter acquire
under any law (common or statutory), provision of the Certificate of
Incorporation of the Corporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any person who is or was serving as a director,
officer, employee or agent of the Corporation or its or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
SECTION 6. SAVINGS CLAUSE. If this Article VI or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify and hold harmless each director and
officer of the Corporation, as to costs, charges and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Article VI that shall not have been invalidated and to the fullest extent
permitted by applicable law.
II-4
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
+4.1 Form of Note (included in Exhibit 4.2 hereto).
+4.2 Indenture by and between the Company and Chase Bank of Texas, N.A. dated as of March 16, 1998.
5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding legality of securities
being registered.
+10.1 Purchase Agreement by and among the Company, BT Alex. Brown, Incorporated, BancAmerica, Robertson
Stephens, Donaldson, Lufkin & Jenrette Securities Corporation and Piper Jaffrey Inc. dated as of March
11, 1998.
+10.2 Registration Rights Agreement by and among the Company, BT Alex. Brown, Incorporated, BancAmerica,
Robertson Stephens, Donaldson, Lufkin & Jenrette Securities Corporation and Piper Jaffrey Inc. dated as
of March 11, 1998.
12.1 Statement Re: Computation of Ratios.
23.1 Consent of Arthur Andersen LLP, Boston, Massachusetts.
23.2 Consent of Arthur Andersen LLP, Chicago, Illinois.
23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (set forth on signature page).
25.1 Form T-1, Statement of Eligibility of and Qualification under the Trust Indenture Act of 1939 of Chase
Bank of Texas, N.A., as Trustee.
27.1 Financial Data Schedule
</TABLE>
- ------------------------
+ Incorporated by reference to the Company's Form 8-K, as filed on March 30,
1998
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
II-5
<PAGE>
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) That, for the purpose of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
Requirements for filing of Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, Commonwealth of Massachusetts, on the 13th
day of May 1998.
CONCENTRA MANAGED CARE, INC.
BY: /S/ DONALD J. LARSON
-----------------------------------------
Donald J. Larson, Chief Executive Officer
and Chairman of the Board of Directors
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Donald J. Larson, Richard A. Parr II and Joseph F. Pesce, and each of them, with
full power of substitution and full power to act without the other, his or her
true and lawful attorney-in-fact and agent in his or her name, place and stead,
to execute in the name and on behalf of each person, individually and in each
capacity stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments, and any related Rule
462(b) Registration Statement and any amendments thereto.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ DONALD J. LARSON Chief Executive Officer and
- ------------------------------ Chairman of the Board May 13, 1998
Donald J. Larson
/s/ DANIEL J. THOMAS President and Chief
- ------------------------------ Operating Officer, May 13, 1998
Daniel J. Thomas Director
/s/ JOSEPH F. PESCE Executive Vice President,
- ------------------------------ Chief Financial Officer & May 13, 1998
Joseph F. Pesce Treasurer
/s/ JOHN K. CARLYLE Director
- ------------------------------ May 13, 1998
John K. Carlyle
/s/ GEORGE H. CONRADES Director
- ------------------------------ May 13, 1998
George H. Conrades
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ ROBERT W. O'LEARY Director
- ------------------------------ May 13, 1998
Robert W. O'Leary
/s/ ROBERT A. ORTENZIO Director
- ------------------------------ May 13, 1998
Robert A. Ortenzio
/s/ MITCHELL T. RABKIN, M.D. Director
- ------------------------------ May 13, 1998
Mitchell T. Rabkin, M.D.
Director
- ------------------------------ May 13, 1998
Lois E. Silverman
/s/ HON. WILLIS D. GRADISON, Director
JR.
- ------------------------------ May 13, 1998
Hon. Willis D. Gradison, Jr.
Director
- ------------------------------ May 13, 1998
Richard D. Rehm
</TABLE>
II-8
<PAGE>
Exhibit 5.1
May 13, 1998
Concentra Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02109
Ladies and Gentlemen:
We have acted as legal counsel to Concentra Managed Care, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended, relating to resales of up to $230,000,000
in principal amount of the Company's 4.5% Convertible Subordinated Notes Due
2003 (the "Notes") and the shares of Company common stock, par value $.01
per share (the "Common Stock"), issuable upon the conversion of the Notes
pursuant to the terms of the Notes and the Indenture dated as of March 16,
1998 (the "Indenture"), between the Company and Chase Bank of Texas, N.A.,
as Trustee (the "Trustee"). The Notes and the Common Stock issuable upon
conversion of the Notes are to be offered for resale by certain
securityholders of the Company.
In reaching the opinions set forth in this letter, we have reviewed
originals or copies of the Registration Statement, the Indenture, the Notes
and such other agreements, certificates of public officials, certificates of
officers of the Company, records, documents and matters of law as we deemed
relevant.
Based on and subject to the foregoing and subject further to
the assumptions, exceptions and qualifications hereinafter
stated, we are of the opinion that:
1. The Notes constitute legally binding obligations of the
Company; and
2. The Common Stock issuable upon conversion of the Notes,
when issued in accordance with the terms of the Notes, will be
validly issued, fully paid and non-assessable.
The opinions expressed above are subject to the following assumptions,
exceptions and qualifications:
A. We have assumed that (i) all information contained in all documents
reviewed by us is true and correct, (ii) all signatures on all documents
reviewed by us are genuine, (iii) all
<PAGE>
documents submitted to us as originals are true and complete, (iv) all
documents submitted to us as copies are true and complete copies of the
originals thereof, (v) each natural person signing any document reviewed
by us had the legal capacity to do so, (vi) each natural person signing in
a representative capacity any document reviewed by us had authority to sign
in such capacity and (vii) the Indenture is a valid and binding agreement
of the Trustee.
B. The opinions expressed in this letter are limited to Delaware General
Corporation Law, the federal laws of the United States of America. We express
no opinion about the effect of federal or state securities laws or the laws of
any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-3 and to the reference to us under the
caption "Legal Matters" in the Registration Statement. In giving this
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act or the rules[nb]and
regulations of the Securities and Exchange Commission promulgated thereunder.
This opinion speaks as of the date hereof, and we disclaim any duty
to advise you regarding any changes subsequent to the date hereof in, or to
otherwise communicate with you with respect to, the matters addressed herein.
Very truly yours,
/s/ Hutchins, Wheeler & Dittmar
--------------------------------
HUTCHINS, WHEELER & DITTMAR,
A Professional Corporation
<PAGE>
Exhibit 12.1
Computation of Ratios
Ratio of Earnings to Fixed Charges
Ratio of Adjusted Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes $ 4,533 $ 4,666 $ 17,494 $ 34,400 $ 13,686
Fixed charges 4,609 8,835 9,150 6,972 14,421
-------- -------- -------- -------- --------
Total Earnings (1) $ 9,142 $ 13,501 $ 26,644 $ 41,372 $ 28,107
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Adjusted Earnings:
Income before income taxes $ 4,533 $ 4,666 $ 17,494 $ 34,400 $ 13,686
Fixed charges 4,609 8,835 9,150 6,972 14,421
Nonrecurring charges - - 898 964 38,625
-------- -------- -------- -------- --------
Total Adjusted Earnings (2) $ 9,142 $ 13,501 $ 27,542 $ 42,336 $ 66,732
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Fixed Charges:
Interest expense $ 1,989 $ 6,151 $ 5,499 $ 2,831 $ 8,972
Interest portion of rent expense 2,620 2,684 3,651 4,141 5,449
-------- -------- -------- -------- --------
Total Fixed Charges $ 4,609 $ 8,835 $ 9,150 $ 6,972 $ 14,421
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges 2.0 1.5 2.9 5.9 1.9
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of adjusted earnings to fixed
charges 2.0 1.5 3.0 6.1 4.6
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
</TABLE>
(1) Sum of net earnings before provisions for income taxes and fixed
charges.
(2) Sum of net earnings before nonrecurring charges,
provisions for income taxes and fixed charges.
<PAGE>
EXHIBIT 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made part of this
Registration Statement.
/s/ Arthur Andersen LLP
--------------------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 11, 1998
<PAGE>
Exhibit 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
of our reports (and to all references to our Firm) included in or
made part of this (the attached) Registration Statement.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 13, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
F O R M T-1
Statement of Eligibility AND QUALIFICATION Under The Trust Indenture Act
of 1939 Of A Corporation
Designated To Act As Trustee
----------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)___.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
Organized under the laws of 75-1992896
the United States of America (I.R.S. employer
(State of incorporation identification no.)
if not a National Bank)
P.O. Box 2320 75221-2320
Dallas, Texas (Zip Code)
(Address of principal executive offices)
Lee Boocker
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
(713)216-2448
(Name, address and telephone
number of agent for service)
----------------------------------------
CONCENTRA MANAGED CARE, INC.
(Exact name of obligor as specified in its charter)
Delaware 43-3634150
(State or other jurisdictions of (I.R.S. employer
incorporation of organization) identification nos.)
312 Union Wharf 02109
Boston, Massachusetts (Zip Code)
(Address of obligor's principal offices)
<PAGE>
4.5% Convertible Subordinated Debentures Due 2003
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
--------------------
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<CAPTION>
Name Address
-------- -----------
<S> <C>
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank Dallas, Texas
Federal Deposit Insurance Corporation Washington, D.C.
National Bank Examiners Dallas, Texas
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
------------------------------
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
Item 16. List of Exhibits
----------------
List below all exhibits filed as part of this statement of
eligibility:
Exhibit 1. Copy of the Articles of Association of the Trustee as
now in effect.
Exhibit 2. A copy of the certificate of authority of the trustee
to commence business.
Exhibit 3. A copy of the authorization of the Trustee to exercise
corporate trust powers.
Exhibit 4. A copy of the existing bylaws of the Trustee.
Exhibit 5. Not Applicable.
Exhibit 6. The consents of the United States institutional trustee
required by Section 321(b) of the Trust Indenture Act of
1939.
Exhibit 7. A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
Exhibit 8. Not Applicable.
Exhibit 9. Not Applicable.
<PAGE>
NOTE REGARDING INCORPORATED EXHIBIT
Effective January 20, 1998, the name of the Trustee was changed from Texas
Commerce Bank National Association to Chase Bank of Texas, National
Association, Exhibit 7 incorporated herein by reference, the Trustee's
Consolidated Reports of Condition and Income for the fourth quarter of 1997,
was filed under the former name of the Trustee.
Exhibit 1. Incorporated by reference to exhibit bearing the same
designation and previously filed with the Securities and Exchange Commission
as exhibit to the Form S-4 file No. 333-47745.
Exhibit 2. Incorporated by reference to exhibit bearing the same
designation and previously filed with the Securities and Exchange Commission
as exhibit to the Form S-4 file No. 333-47745.
Exhibit 3. Incorporated by reference to exhibit bearing the same
designation and previously filed with the Securities and Exchange Commission
as exhibit to the Form S-4 file No. 333-47745.
Exhibit 4. Incorporated by reference to exhibit bearing the same
designation and previously filed with the Securities and Exchange Commission
as exhibit to the Form S-4 file No. 333-47745.
Exhibit 6. Incorporated herewith.
Exhibit 7. Incorporated by reference to exhibit bearing the same
designation and previously filed with the Securities and Exchange Commission
as exhibit to the Form S-4 file No. 333-47745.
The answer to Item 2 is based in part on information provided or
confirmed by the obligor. The accuracy and completeness of such information
is hereby disclaimed by the Trustee.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chase Bank of Texas, National Association, a national banking
association organized and existing under the laws of the United States, of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Dallas, and State of Texas, on the 1st day of May 1998.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By: /s/ Michael A. Scrivner
---------------------------------
Name: Michael A. Scrivner
Title: Vice President
<PAGE>
EXHIBIT 6
Chase Bank of Texas, National Association, as a condition to qualification
under the Trust Indenture Act of 1939, consents that reports of examinations by
federal, state, territorial, of district authorities may be furnished by such
authorities to the Securities and Exchange Commission of the United Stated upon
request of said Commission for said reports,as provided in Section 321 of said
Trust Indenture Act of 1939.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By: /s/ Michael A. Scrivner
--------------------------------------
Name: Michael A. Scrivner
Title: Vice President
Date: May 1, 1998
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